Born Meshilem Meier Weisenfreund to a Jewish family in Lwow, Galicja, an ethnically Polish part of the then-Austro-Hungarian Empire, which became Lvov, Ukraine (known as Lviv, Ukraine since the 1990s) following the end ofWWII, as part of the Yalta Conference.

His family emigrated to the United States in 1902. Both of Muni's parents were actors with the Yiddish theater and it was only natural that he would join them on stage. He made his stage debut at the age of twelve. In a stage quirk, Muni played an eighty-year-old man as his first role. It was an appropriate beginning for an actor who loved wearing elaborate costumes and assuming accents in his film career.

He was quickly recognized by Maurice Schwartz, who signed him up with his Yiddish Art Theater. During his time in Yiddish theater, he was known as Moony Weisenfreund.

A 1925 New York Times article singled out his and Sam Kasten's performances at the People's Theater as among the highlights of that year's Yiddish theater season, describing them as second only to Ludwig Satz.

Muni was 29 when he began acting on Broadway in 1924. His first role, that of an elderly Jewish man in the play We Americans, written by playwright Sam Harris; it was also the first time that he ever acted in English.

He was signed by Fox three years later, in 1929, and received an Oscar nomination for his first film The Valiant, but he was unhappy with the roles and decided to return to Broadway.

In 1932 Paul Muni returned to Hollywood to star in such harrowing pre-Code films as Scarface and I Am a Fugitive from a Chain Gang. He received a second Best Actor nomination for the latter film. Warner Brothers' recognized his considerable talent and signed a long-term contract with him.

He went on to receive a Best Actor nomination for The Life of Emile Zola (1937), and to win the Academy Award for The Story of Louis Pasteur (1939).

In the ensuing years until his retirement in 1959, he spent his time acting on film and stage. He was widely recognized as a talented if eccentric individual. He would go into a rage whenever anyone wore red, but at the same time he could often be found between sessions relaxing with his violin. Over the years, he also became increasingly dependent on his wife, Bella, who terrified directors by forcing them to redo scenes that did not meet her satisfaction.

After several failed projects, Muni was nominated for a Tony Award in 1955 for the role of Henry Drummond in the play Inherit the Wind.

He was becoming increasingly infirm, however, and by 1959, soon after receiving his final Academy Award nomination for The Last Angry Man (1959) he retired from acting.