Otis was born in Halifax, Vermont, to Stephen Otis, Jr. and Pheobe Glynn. He moved away from home at the age of 19, eventually settling in Troy, New York, where he lived for five years employed as a wagon driver. In 1834, he married Susan A. Houghton. They would have two children, Charles and Norton. Later that year, Otis suffered a terrible case of pneumonia which nearly killed him, but he earned enough money to move his wife and three year old son to the Vermont Hills on the Green River. He designed and built his own gristmill, but did not earn enough money, so he converted it into a sawmill, but still did not attract customers. Now having a second son, he started building wagons and carriages, at which he was fairly skilled. His wife later died, leaving Otis with two sons aged seven and two.

At thirty-four years old, and hoping for a fresh start, he married Betsy A. Boyd and moved to Albany, New York. He got a job as a bedstead maker for Otis Tingely. He was skilled as a craftsman, and, tired of working all day to make only twelve bedsteads, he invented and patented a rail turner. It could produce bedsteads four times as fast as could be done manually, about fifty a day. His boss gave him a $500 bonus, and Otis then moved into his own business. At his leased building, he started designing a safety brake that could stop trains instantly and an automatic bread baking oven. The city of Albany then cut off his power source by diverting the stream he was using for the population's fresh water supply.

In 1851, having no more use for Albany, he first moved to Bergen City, New Jersey, to work as a mechanic, then to Yonkers, New York, as a manager of an abandoned sawmill which he was supposed to convert into a bedstead factory. He was forty, and when he started to clean up the factory, he wondered how he could get all the old debris up to the upper levels of the factory. He heard of hoisting platforms, but they often broke, and he didn't want to take risks. He and his sons, who were also tinkerers, designed their own "safety elevator" and tested it successfully. He thought so little of it he neither patented it nor requested a bonus from his superiors for it, nor did he try to sell it. After having several sales, and after the bedstead factory declined, Otis took the opportunity to make an elevator company out of it, later called Otis Steam Elevator Works. No orders came over the next several months.

Then, the 1853 New York World's Fair offered a great chance at publicity. At the New York Crystal Palace, Elisha Otis amazed a crowd when he ordered the only rope holding the platform on which he was standing cut. The rope was severed by an axeman, and the platform fell only a few inches before coming to a halt. After the World's Fair, Otis received continuous orders, doubling each year. He developed different types of engines, like a three-way steam valve engine, which could transition the elevator between up to down and stop it rapidly.

In his spare time, he designed and experimented with his old designs of bread-baking ovens and train brakes, and patented a steam plow in 1857, a rotary oven in 1858, and, with Charles, the oscillating steam engine in 1860. For the remainder of his life, all the major corporations purchased Otis's invention and recognized his genius. Otis contracted diphtheria and died on April 8, 1861 at age 49.