Goldman grew up in a Jewish family in Highland Park, Illinois, a Chicago suburb, and obtained a BA degree at Oberlin College in 1952 and an MA degree at Columbia University in 1956.His brother was the late , author and playwright.

William Goldman had published five novels and had three plays produced on Broadway before he began to write screenplays. Several of his novels he later used as the foundation for his screenplays. In the 1980s he wrote a series of memoirs looking at his professional life on Broadway and in Hollywood (in one of these he famously remarked that Nobody knows anything). He then returned to writing novels. He then adapted his novel to the , which marked his re-entry into screenwriting.
Goldman has won two Academy Awards: an Academy Award for Writing Original Screenplay for Butch Cassidy and the Sundance Kid, and an Academy Award for Writing Adapted Screenplay for All the Presidents Men. He has also won two Edgar Awards, from the Mystery Writers of America, for Best Motion Picture Screenplay: for Harper in 1967, and for Magic (adapted from his own 1976 novel) in 1979.