Wolff was born in 1945 in Birmingham, Alabama. After attending Concrete High School in Concrete, Washington, Wolff applied to, and was accepted by, The Hill School under the self-embellished name Tobias Jonathan von Ansell-Wolff, III. He was later expelled. He holds a First Class Honours degree in English from Hertford College, Oxford (1972) and an M.A. from Stanford University. In 1975 he was awarded a Wallace Stegner Fellowship in Creative Writing at Stanford.

Wolff is the Ward W. and Priscilla B. Woods Professor in the School of Humanities and Sciences at Stanford University, where he has taught classes in English and creative writing since 1997. He also served as the director of the Creative Writing Program at Stanford from 2000 to 2002.

Prior to his current appointment at Stanford, Wolff taught at Syracuse University from 1980 to 1997. While at Syracuse he served on the faculty with Raymond Carver and was an instructor in the graduate writing program. Authors who worked with Wolff while they were students at Syracuse include Jay McInerney, Tom Perrotta, George Saunders, Alice Sebold, William Tester, Paul Griner, Ken Garcia, and Paul Watkins.

Tobias Wolff is best known for his work in two genres: the short story and the memoir. His first short story collection, In the Garden of the North American Martyrs, was published in 1981. The collection was well received and several of its stories have since reappeared in a number of anthologies. Its publication coincided with a period in which several American authors who worked almost exclusively in the short story form were receiving wider recognition. As writers like Wolff, Raymond Carver, and Andre Dubus became better known, many proclaimed that the United States was in the midst of a renaissance of the short story. (The 20th-century North American version of realism these writers used was often glibly labelled Dirty realism).

Wolff, however, repudiates such claims. In 1994, in the introduction to The Vintage Book of Contemporary American Short Stories, he wrote,

To judge from the respectful attention this renaissance has received from reviewers and academics, you would think that it actually happened. It did not. This is a rhetorical flourish to give glamour, even valor, to the succession of one generation by another. The problem with the word "renaissance" is that it needs a dark age to justify itself. I can't think of one, myself... The truth is that the short story form has reliably inspired brilliant performances by our best writers, in a line unbroken since the time of Poe.

Wolff's 1984 novella The Barracks Thief won the PEN/Faulkner Award for Fiction for 1985. Most of the action takes place at Fort Bragg, North Carolina, where three recent paratrooper training graduates are temporarily attached to an airborne infantry company as they await orders to report to Vietnam. Because most of the men in the company fought together in Vietnam, the three newcomers are treated as outsiders and ignored. When money and personal property are discovered missing from the barracks, suspicion falls on the three newcomers. The narrative structure of the book contains several shifts of tone and point of view as the story unfolds.

In 1985, Wolff's second short story collection, Back in the World was published. Several of the stories in this collection, such as "The Missing Person," are significantly longer than the stories in his first collection.

Wolff chronicled his early life in two memoirs. This Boy's Life (1989) concerns itself with the author's adolescence in Seattle and then Newhalem, a remote company town in the North Cascade mountains of Washington State. The memoir describes the nomadic and uncertain life Wolff and his mother experienced after the divorce of Wolff's parents and then his mother's subsequent marriage to an abusive husband and stepfather. In Pharaoh's Army (1994) records Wolff's U.S. Army tour of duty in Vietnam. A third collection of stories, The Night in Question, was published in 1997. Our Story Begins, a collection of new and previously-published stories, appeared in 2008.

Whether he is writing fiction or non-fiction, Wolff's prose is characterized by an exploration of personal/biographical and existential terrain. As Wyatt Mason wrote in the London Review of Books, "Typically, his protagonists face an acute moral dilemma, unable to reconcile what they know to be true with what they feel to be true. Duplicity is their great failing, and Wolff's main theme."

In 1989, Wolff was chosen as recipient of the Rea Award for the Short Story. Wolff has received the O. Henry Award on three occasions, for the stories 'In the Garden of North American Martyrs' (1981), 'Next Door' (1982), and 'Sister' (1985). On March 4, 2009, he was awarded The Story Prize for Our Story Begins.

Wolff's work has found a wider audience through its adaptation to film. This Boy's Life became a feature film directed by Michael Caton-Jones which starred Leonardo DiCaprio, Robert De Niro, and Ellen Barkin.

In 2001, Wolff's acclaimed short story "Bullet in the Brain" was adapted into a short film by David Von Ancken and CJ Follini starring Tom Noonan and Dean Winters.

Tobias Wolff's older brother is the author and University of California, Irvine professor Geoffrey Wolff. A decade before Wolff wrote This Boy's Life, Geoffrey wrote a memoir of his own about the boys' biological father, entitled The Duke of Deception.

Wolff's mother, having settled in Washington, D.C., eventually became President of the League of Women Voters.

Tobias Wolff is married and has three children.