John Howard Payne was born in New York City on June 9, 1791, one of the eldest of nine children and seven sons. Soon after his birth his father moved the family to Boston, where he headed a school. The family also spent time at his grandfather's colonial-era house in East Hampton, New York, which was later preserved in honor of Payne. As a youth, Payne showed precocious dramatic talent, but his father tried to discourage that path. After the death of an older brother, his father installed young Payne, age 13, in the brother's position at the same accountants' firm in New York, but the boy did not have a mind for commerce. His interest in theater was irrepressible. He published the first issue of The Thespian Mirror, a journal of theater criticism, at age 14. Soon after that, he wrote his first play, Julia: or the Wanderer, a comedy in five acts. Its language was racy, and it closed quickly. Payne then caught the attention of John E. Seaman, a wealthy New Yorker who recognized his talent and paid for his education at Union College. There Payne started a college paper called the Pastime, which he kept up for several issues.

When Payne was 16, his mother died and his father's business failed. Payne thought he could best assist his family by leaving college and going on stage, and made his debut as Young Norval at the old Park Theatre in New York on February 24, 1800. He was a brilliant success, and played in other major cities to acclaim. In a brief interval away from the theatre, he founded the Athenaeum, a circulating library and reading room. After Payne's father's death, the English tragedian George Frederick Cooke came to America and became interested in the young actor, appearing with him in King Lear at New York's Park Theatre. He encouraged Payne to go to London for its theatre world, which the young man did in February 1813.

Payne's first engagements as an actor in London were very successful, and he played at Drury Lane and Covent Garden theatres. Payne also went to Paris, where he attended much theater and met people in the circles. He decided to try writing, which he did easily and quickly, both in English, and translating from French to English. He was paid to translate several French plays for production in London. In 1818 he wrote his own play Brutus, which he sold. Wanting to branch out, he produced some of his own pieces at Sadler's Wells Theatre, but as a theater manager, struggled to make ends meet. In 1823 Payne worked on a play proposal with Charles Kemble, the manager of Covent Garden Theatre, out of a number he sold to him as a group for £230. Because the one Kemble chose was being produced elsewhere, Payne easily changed the plot, added lyrics for songs and duets to it, and transformed it into an opera he called Clari; or the Maid of Milan. This included his poem and ballad "Home, Sweet Home", which helped make the opera an instantaneous success and Payne a famous man. Sir Henry Bishop wrote the music, based on an Italian folk song. When the song was published separately, it quickly sold 100,000 copies. The publishers made a considerable profit from it, net £2100 in the first year, and the producer of the opera did well. Only Payne did not really profit by its success. "While his money lasted, he was a prince of bohemians", but had little business sense.

While in Europe, Payne was reportedly romantically infatuated with Mary Shelley, the author of Frankenstein. She had nothing but a literary interest in him. Payne never married.

After spending nearly twenty years in Europe, Payne returned to New York and the United States in 1832. Friends arranged a benefit concert in New York to try to help him give him a stake. He also toured the country with artist John James Audubon. Payne developed a strong interest in the Cherokee Indians, whose fate had become a public issue. Acknowledged as one of the Five Civilized Tribes, they had developed self-government, a constitution, and written language, but they were under extreme pressure from the US government for removal to the trans-Mississippi West from the southeastern United States. Payne was taken by their story, and lobbied Congress against their removal. In 1836 Payne went to Georgia as the guest of the Cherokee Chief John Ross, who opposed removal. There were great tensions within the tribe and state at the time. Major Ridge supported removal. Payne visited with Ross to collect and record the myths, religious traditions, foodways and other aspects of the Cherokees. While staying with Ross, Payne was arrested and briefly imprisoned by Georgia authorities as his arrival was considered suspicious. Intercession by General Edward Harden of Athens, to whom Payne had a letter of introduction, accomplished his release.

Payne reported his findings in popular newspaper articles, and also had considerable work that was never published. Payne's collected, unpublished papers from the 1830s have served as important source material for scholars. The writer had visited with the nation as it was on the verge of dramatic change. In 1838 most of the Cherokee did go west on the Trail of Tears. Removal meant the Cherokee Nation was split and transformed, with eastern and western groups developing independently after that time.
Payne believed his research demonstrated that the Cherokee were one of the Ten Lost Tribes of ancient Israel. Payne was reflecting historians and other researchers who still proposed this theory in the nineteenth century. It was at a time when historians tried to correlate their ideas with the Bible and classical texts, and were trying to fit the Native Americans into a biblical scheme of origin. Some scholars criticized Payne for his refusal to accept that Cherokees had their origins in North America. Others considered his work biased by his attempt to show the "Hebrew" origins of Cherokee religion. When coming upon elements he seemed to recognize from Judaism, rather than seeing these as organic forms that could have arisen independently in numerous religions (Eliade), Payne claimed they were derived from Judaism.

The work of archaeologists, linguists and anthropologists has confirmed that Cherokee were descended from prehistoric indigenous peoples of North America. Scholars have concluded that these prehistoric peoples originated from eastern Asia and migrated across the Bering Straits to North America more than 15,000 years ago. Although Payne's theory of Cherokee origins related to Biblical tribes has been replaced by the facts of Asian origin, his unpublished papers are useful to researchers as a rich source of information on the culture of the Cherokee in the early decades of the 19th century.

In 1842 President John Tyler appointed Payne as the American Consul in Tunis, due in part from support from statesman William Marcy and Secretary of State Daniel Webster, who were moved by his famous song and wanted to help him. Payne served twice in North Africa (the area of present-day Tunisia). He died in Tunis in 1852 and was buried there in St. George's Protestant Cemetery.

Payne's song was widely sung during the American Civil War, when it was treasured by troops of both the North and the South. It was also a particular favorite of President Abraham Lincoln. He asked Italian opera star Adelina Patti to perform it for him and his wife when she appeared at the White House in 1862. The Lincolns were still mourning the death of their son Willie.

In February 1883, Payne's ashes were disinterred and brought to the U.S. by steamer, at the suggestion and expense of the philanthropist W.W. Corcoran of Washington, DC, who arranged reinterment in his home city. (He was the founder of the Corcoran Gallery.) In New York, the coffin with Payne's ashes was received with honors and transported by black funeral hearse to City Hall, where it was held in state while several thousand people visited the hall to pay respects. For a day all the papers were filled again with the story of his life, for

"his song is that one touch of nature which makes the world kin. It is the frailest thread of which fame was ever spun."

The ashes were transported to Washington, DC, and held for services on the anniversary of Payne's birth in June. Arrangements were made for a memorial service to mark the reinterment of Payne's ashes at Oak Hill Cemetery in the Georgetown neighborhood. (Corcoran had created this cemetery, where many Civil War veterans were buried.) The memorial service was held on the 91st anniversary of Payne's birth and was attended by President Chester A. Arthur, members of his cabinet, the State Department and the Supreme Court; the Marine Band, and a crowd of 2,000-3,000, filled with literary and other prominent people. Organizers arranged for a full choir to sing "Home, Sweet Home."