Mitchell was born in Bath, Maine, the home of his maternal grandparents. Mitchell's family were wealthy at the time of his birth. When he was eight years old, his parents moved with him to New York City, to a house on Fifth Avenue directly across from the future site of the New York Public Library's main branch.

In 1863 he witnessed the Draft Riots, later describing them in his memoirs. In the aftermath of the bloody riots, Mitchell's father moved the family to Tar River, North Carolina. While living there, as a boy of fourteen, young Mitchell's letters to The Bath Times (his birthplace's local paper) were his first published writing.

The one great personal tragedy of Mitchell's life was a bizarre accident in 1872, when he was twenty years old. On a train journey from Bowdoin College to Bath, Maine, a hot cinder from the engine's smokestack flew in through the window and struck Mitchell's left eye, blinding it. After several weeks, while doctors attempted to restore this eye's sight, Mitchell's uninjured right eye suddenly underwent sympathetic blindness, rendering him completely sightless. His burnt left eye eventually healed and regained its sight, but his uninjured right eye remained blind. The sightless eye was later removed surgically, and replaced with a prosthetic glass eye. While recovering from this surgery, Mitchell wrote his story "The Tachypomp".

Mitchell first became a professional journalist at the Daily Advertiser in Boston, Massachusetts, where his mentor was Edward Everett Hale, now also recognized as an early author of science fiction.

Mitchell had a life-long interest in the supernatural and paranormal, and several of his early newspaper pieces are factual investigations of alleged hauntings, usually determined (by Mitchell) to have a normal explanation. Mitchell later interviewed and befriended Madame Blavatsky, the well-known alleged psychic, yet (despite their friendship) he considered her a fraud.

Mitchell's entree to the New York Sun, where he eventually found long-term employment, was his ghost story "Back from that Bourne". Fiction published as fact, this purported to be the true account of a recently deceased resident of Maine returning as a ghost. One of Mitchell's later stories, "An Uncommon Sort of Spectre", is one of fiction's earliest examples of a ghost from the future. Many of Mitchell's fictions -- published originally as factual newspaper articles -- deal with ghosts or other supernatural events, and would now be considered works of fantasy rather than science fiction.

Mitchell often inserted more than one innovative concept into a science-fiction tale. His 1879 story "The Senator's Daughter", set in the future year 1937, contains several technological predictions which were daring for the time: travel by pneumatic tube, electrical heating, newspapers printed in the home by electrical transmission, food-pellet concentrates, international broadcasts, and the suspended animation of a living human being through freezing (cryogenics). This same story contains several social predictions: votes for American women, a war between the United States and China (with China winning), and interracial marriage.

In 1874, Mitchell married Annie Sewall Welch. During the early years of Mitchell's tenure at the Sun, they lived in an apartment on Madison Avenue, where the marriage produced two sons. (The second son was born during a visit to relatives in Bath, Maine.) The need for larger quarters brought the couple to Bloomfield, New Jersey, where they lived while their next two sons were born. By all accounts, Mitchell's family life was happy. One of Mitchell's colleagues at the Sun was that paper's night editor Garrett P. Serviss, who would also become an important figure in early science fiction. Mitchell was a long time resident of Glen Ridge, New Jersey and is credited with founding the community: he moved to this region when it was comparatively unpopulated, and his local influence led others to build houses there.

On July 20, 1903, Mitchell became editor-in-chief of the New York Sun, at that time the leading newspaper in the United States. In 1912, following his first wife's death, he married Ada M. Burroughs; this marriage produced a fifth son. Mitchell remained a popular and respected figure in American journalism until his death (apparently from a heart attack) while visiting New London, Connecticut. He was buried in his beloved Glen Ridge. During his lifetime, his journalism paid him well, and he clearly had no desire for public recognition, since he had many opportunities to achieve this yet never attempted to do so.