He was born in Kassel, Germany to a Jewish family. His father was a rabbi. His birthname was Israel Bere Josafat. In Göttingen Reuter met Carl Friedrich Gauss who experimented with the transmission of electrical signals via wire.

On 29 October 1845, he moved to London, where he called himself Joseph Josephat. On November 16 he converted to Christianity during a ceremony at St. George's German Lutheran Chapel in London and changed his name to Paul Julius Reuter. One week later on November 23, he married Ida Maria Elizabeth Clementine Magnus in Berlin. After the failed Revolution of 1848, he fled from Germany and went to Paris and worked there in Charles-Louis Havas' news agency, the future Agence France Presse.

While telegraphy evolved, Reuter first founded the Reuters News Agency in Aachen which transferred messages between Brussels and Aachen using carrier pigeons. This was the missing link to connect Berlin and Paris. The carrier pigeons were much faster than the post train, giving Reuter faster access to stock news from the Paris stock exchange. In 1851, the carrier pigeons were superseded by a direct telegraph link. A telegraph link was established between Britain and the European continent through the English Channel. This link was extended to the south-western shore of Ireland, at Cork in 1863. There ships coming from America threw canisters containing news into the sea. The news was telegraphed to London, arriving before the ships.

In 1851 Reuter moved back to London and set up an office at the London Stock Exchange. Reuter founded Reuters, one of the major financial news agencies of the world. On 17 March 1857, Reuter was naturalised as a British subject, and on September 7, 1871, the German Duke of Saxe-Coburg-Gotha conferred a barony (Freiherr) on Julius Reuter. The title was "confirmed by Queen Victoria as conferring the privileges of the nobility in England".

Baron de Reuter had two sons, George, 3rd Baron de Reuter, and André Reuter. His only daughter, Clementine Maria, married Count Otto Stenbock, and after his death, Sir Herbert Chermside, a governor of Queensland. George, 3rd Baron de Reuter had two sons, Oliver, 4th Baron de Reuter, and Ronald Reuter. The last member of the family, Marguerite, widow of the 4th baron, died on January 25, 2009.

Paul Reuter died in Villa Reuter, Nice, France, and was buried in the family vault at West Norwood Cemetery in London.

On February 25, 1999, the Reuters News Agency commemorated the 100th anniversary of the death of its founder by launching a university award (Paul Julius Reuter Innovation Award) in Germany.