He was born in New York City to Lebanese parents; his father left home when William was six years old. Raised in relative poverty by his deeply religious Catholic mother, he apparently lived at twenty-eight different addresses during his childhood. He attended several Catholic and Jesuit schools before finding his raison d'etre and attended Georgetown University to study English.

In 1960 Blatty published Which Way to Mecca, Jack?, which dealt humorously with his work at the United States Information Agency in Lebanon. He then published the comic novels John Goldfarb, Please Come Home (1963), I, Billy Shakespeare (1965) and Twinkle, Twinkle, "Killer" Kane (1966), none of which made much critical or commercial impact.

In the 1960s Blatty formed a relationship with director Blake Edwards by writing films such as A Shot in the Dark (1964), What Did You Do in the War, Daddy? (1966), Gunn (1967), and Darling Lili (1970).

Screenwriting work soon ran dry, however and so Blatty resumed novel writing. Allegedly retiring to a remote and rented chalet in woodland off Lake Tahoe, Blatty wrote The Exorcist, a story about a twelve-year-old girl being possessed by a powerful demon. It would eventually be translated by himself and the director William Friedkin into one of the most famous and controversial mainstream horror movies of all time. According to Blatty, parts of the screenplay were unintentionally written in an apartment with the number 666.

In 1978, Blatty re-hashed Twinkle, Twinkle, "Killer" Kane, a story about ex-soldiers in a mental institution during the Vietnam War, as The Ninth Configuration; and in 1980 he wrote, directed, and produced a film version. The film, a blend of farce and psychological drama with a religious undercurrent, thoroughly perplexed audiences and was a flop. It has since acquired a rather sizable cult following.

In 1983, he wrote a novel called Legion, a sequel to The Exorcist which later became the basis of the film The Exorcist III. Blatty originally wanted the movie version to be titled Legion but the film producers wanted it to be more closely linked to the original. The first sequel, Exorcist II: The Heretic (1977) was disappointing both critically and commercially. Blatty had no involvement in this first sequel and his own follow-up ignored it entirely.

Blatty's autobiography is titled I'll Tell Them I Remember You. A critical essay on Blatty's work can be found in S. T. Joshi's book The Modern Weird Tale (2001).