He was born in Hereford, son of a shoemaker, and educated at Hereford Cathedral School and Brasenose College, Oxford, in 1652, achieving an MA in arts and divinity nine years later. After receiving his degree in 1656 he took holy orders and worked for ten years as a parish priest in Credenhill, near Hereford, before becoming the private chaplain to Sir Orlando Bridgeman, the Lord Keeper of the Seals of Charles II, and minister at Teddington in 1667. He died at Bridgeman's house at Teddington on or about 27 September 1674 and is buried in St Mary's Church under the reading desk.

Traherne was an inconsequential literary figure during his life, whose works were unappreciated until long after his death. He led a humble, devout life, largely sheltered from the literary community. Only one of his works, Roman Forgeries (1673), was published in his lifetime. Christian Ethicks (1675) followed soon after his death, and later A Serious and Patheticall Contemplation of the Mercies of God (1699); but after that much of his finest work was lost, corrupted or misattributed to other writers.

His poems have a curious history. They were left in manuscript and presumably passed with the rest of his library into the hands of his brother Philip. They then apparently passed into the possession of the Skipps family of Ledbury, Herefordshire. When the property of this family was dispersed in 1888 the value of the manuscripts was unrecognised, for in 1896 or 1897 they were discovered by W. T. Brooke on a street bookstall. Alexander Grosart bought them, and proposed to include them in his edition of the works of Henry Vaughan, to whom he was convinced the writings belonged. He left this task uncompleted, and Bertram Dobell, who eventually secured the manuscripts, discerned that the author had attended Oxford University. He was then able to establish the authorship of Thomas Traherne.

As so little of Traherne's work had (apparently) survived his death, Traherne was previously labeled a “missing person” in the Oxford Dictionary of National Biography. In 2004, thanks to a number of additional discoveries, his status changed so much that he is no longer labeled a “missing person." He is now highly regarded, such that if there were a picture of him (no portrait of Traherne has been authenticated), he would be put next to other well-knowns such as Wordsworth.

The discoveries responsible for his renewed vindication as a theologian, beside the poems, are the Centuries of Meditations, a collection of short paragraphs or meditations reflecting on Christian life and ministry, philosophy, happiness, desire and childhood. These are gathered in groups of a hundred, four complete centuries and an unfinished fifth. Some of these, evidently autobiographical in character, describe a childhood from which the "glory and the dream" was slow to depart. Of the power of nature to inform the mind with beauty, and the ecstatic harmony of a child with the natural world, the earlier poems, which contain his best work, are full. In their manner, as in their matter, they remind the reader of William Blake and William Wordsworth. The poems on childhood may well have been inspired by Vaughan's lines entitled The Retreat. He quotes George Herbert's "Longing" in the newly discovered Lambeth Manuscript. His poetry is essentially metaphysical and his workmanship is uneven, but the Dobell poems contain passages of great beauty.

His poems were published in The Poetical Works (1903) and Poems of Felicity (1910). The Centuries appeared in 1908; The Select Meditations were only published in 1997. In 1996 and 1997, another of Traherne’s manuscripts were discovered in the Folger Library in Washington DC by Julia Smith and Laetitia Yeandle. A second was discovered in Lambeth Palace Library in London by Jeremy Maule. The Ceremonial Law, from the Folger library, is an unfinished epic poem of over 1,800 lines. The Lambeth Manuscript contains four, and a fragmentary fifth, mainly prose works known as: Inducements to Retiredness, A Sober View of Dr Twisse, Seeds of Eternity, The Kingdom of God and the fragment Love. For accounts of these discoveries see the Times Literary Supplement articles by Julia Smith and Laetitia Yeandle (7 November 1997) and Denise Inge and Cal Macfarlane (2 June 2000). These two finds are a primary contributing factor to why Traherne is now being considered as much as a theologian as a poet.

Traherne was one of the Metaphysical poets and probably the most celebratory of all of them. Although his links with Neo-Platonism and the Cambridge Platonists have been much noted, he also drew on the writings of Aristotle and on the Early Church Fathers for his concept of Man. His writing expresses an ardent, almost childlike love of God, similar to that of Gerald Manley Hopkins, and a firm belief in man's relation to and creation from divinity. He introduced a child’s viewpoint unknown or certainly unappreciated at the time, as Puritans were the dominant religious group of England during his lifetime. His poetry frequently explores the glory of creation and what he perceived as his intimate relationship with God. Little mention is made of sin and suffering in the works that dominated 20th century criticism, and some have seen his verse as bordering upon pantheism (or perhaps panentheism). However, recent discoveries such as the Select Meditations, Inducements to Retiredness and A Sober View of Dr Twisse contain both discussions of church doctrines surrounding the question of sin, and moments of personal confession. These discussions are, however, far less dour and damning than one would expect to find in similar works of the period by Puritan or Catholic theologians. The following passage, from Centuries of Meditation, illustrates just how little focus Traherne placed on the subject of sin in that work:

And yet, in the newly discovered work A Sober View of Dr Twisse...a work devoted to the question of election and reprobation...he writes:"He was excluded the Kingdom of Heaven, where nothing can enter that hates God, and whence nothing can be excluded that loves him. The loss of that Love is Hell: the Sight and Possession of that Love is Heaven. Thus did sin exclude him Heaven."

Traherne was also concerned with the stability of the Restoration church in England. His confrontations with Roman Catholics and Nonconformists alike have this in common, a passion for his national church. Another great passion is his love of the natural world frequently displayed in a very Romantic treatment of nature. While Traherne credits a divine source for its creation, his praise of nature is nothing less than that which one would expect to find in Thoreau. Many consider him a writer of the sublime, and in his writing, he tried to reclaim the lost appreciation for the natural world as well as paying tribute to what he knew of in nature that was more powerful than he was. In this sense, Traherne seems to have anticipated the Romantic movement over one-hundred and thirty years before it ever occurred. There is frequent discussion of man's almost symbiotic relationship with nature, as well as frequent use of literal setting (that is, an attempt to faithfully reproduce a sense experience from a given moment), a technique later used frequently by William Wordsworth.

Traherne's work was personally influential on the thought of such notables as Thomas Merton, Dorothy Sayers, Elizabeth Jennings and C. S. Lewis, who called Centuries of Meditations "almost the most beautiful book in English."

A stanza from Traherne is quoted in the movie Amazing Grace, the story of William Wilberforce by abolitionist Thomas Clarkson. Clarkson quotes, "Strange treasures in this fair world appear..." and goes on to say it is from a poem by Thomas Traherne.

The British composer, Gerald Finzi (died 1956), set several Traherne texts to music (Dies natalis, Opus 8, completed 1939) of such exceptional beauty as to match the metaphysical quality of the poems.

The first stanza of Traherne's The Rapture is employed in the form of a riddle, by an assassin of sorts called a 'warrior-poet', in The Broken God, a 1992 science fiction novel with philosophical leanings written by David Zindell.

The Incredible String Band quote from Traherne extensively in the song Douglas Traherne Harding on their album Wee Tam and the Big Huge, relating the philosophy of Traherne to that of Douglas Harding.

The title and some of the thought of Richard Wilbur's poem A World Without Objects Is a Sensible Emptiness comes from Traherne's Centuries of Meditations, specifically Second Century, Meditation 65.

Phil Rickman frequently refers to Traherne's poetry in his Merrily Watkin's series of novels.

Traherne is honored in the Church of England on October 10 and in the Episcopal Church on September 27.