He was born in Vichy, Allier, the only child of a pharmacist. His father died when he was 8, and he was brought up by his mother and aunt. His father had been owner of the Vichy Saint-Yorre mineral water springs, and the family fortune assured him an easy life. He travelled Europe in style. On luxury liners and the Orient Express he carried off the dandy role, with spa visits to nurse fragile health.

Poèmes par un riche amateur, published in 1908, received Octave Mirbeau's vote for Prix Goncourt. Three years later, his novel Fermina Márquez, inspired by his days as a boarder at Sainte-Barbe-des-Champs at Fontenay-aux-Roses, had some Prix Goncourt votes in 1911.

He spoke six languages including English, Italian and Spanish. In France he helped translate and popularise Samuel Taylor Coleridge, Walt Whitman, Samuel Butler, and James Joyce, whose Ulysses was translated by Auguste Morel (1924-1929) under Larbaud's supervision.

At home in Vichy, he saw as friends Charles-Louis Philippe, André Gide, Léon-Paul Fargue and Jean Aubry, his future biographer. An attack of hemiplegia and aphasia in 1935 left him paralysed. Having spent his fortune, he had to sell his property and 15,000 book library. Despite his illness, he continued to receive many honorary titles, and in 1952 he was awarded the Prix National des Lettres.

The Prix Littéraire Valery Larbaud was created in 1957 by L'Association Internationale des Amis de Valery Larbaud, a group created to promote the author's work. Past winners of this yearly award include J.M.G. Le Clézio, Jacques Réda, Emmanuel Carrère, and Jean Rolin.

Georges Perec's character Bartlebooth is a cross between Melville's Bartleby and Larbaud's Barnabooth.