William S. Halsted was born on September 23, 1852 in New York City. His mother was Mary Louisa Haines and his father William Mills Halsted, Jr. His father was a businessman with Halsted, Haines and Company. Halsted was educated at home by tutors until the age of ten, when he was sent to boarding school in Monson, Massachusetts. He didn't like his new school and even ran away at one point. He was then sent to Phillips Academy in Andover, Massachusetts, where he graduated in 1869. He entered Yale College in 1870. At Yale, Halsted was captain of the football team, played baseball and rowed crew. Halsted entered Columbia University College of Physicians and Surgeons in New York in 1874. After three years, in 1877, he graduated with an M.D..

After graduation, Halsted joined the New York Hospital as house physician, where he introduced the hospital chart which tracks the patient's temperature, pulse and respiration. It was at New York Hospital that Halsted met his closest friend, the pathologist William H. Welch.

Halsted then went to Europe to observe the great European surgeons and scientists, including Chiari, Zuckerkandl, Schneck, Billroth, Braun, Wölfler, Mikulicz, Kölliker, Stoehr, von Bergmann, Volkmann, Schede, Esmarch, and Bassini. He returned to New York in 1880 and for the next six years led an extraordinarily vigorous and energetic life. He operated at multiple hospitals, including Roosevelt Hospital, the College of Physicians and Surgeons, Charity Hospital, Emigrant Hospital, Bellevue Hospital and Chambers Street Hospital. He was an extremely popular, inspiring and charismatic teacher. In 1882 he performed one of the first gallbladder surgeries in the United States (a cholecystotomy performed on his mother on the kitchen table at 2 A.M.). He also performed one of the first blood transfusions in the United States. He had been called to see his sister after she had given birth. He found her moribund from blood loss, and in a bold move withdrew his own blood, transfused his blood into his sister, and then operated on her to save her life.

On October 11, 1884 Halsted read a report, from Dr. Carl Koller, describing the anesthetic power of cocaine when it is instilled into the eye. Halsted realized that cocaine may be a great local anesthetic. Having learned the scientific method when he was in Europe, Halsted, together with his students and fellow physicians, began to experiment with cocaine. They injected each other's nerves and showed that cocaine when injected into a nerve can produce safe and effective local anesthesia. Halsted became addicted, and was eventually sent to Butler Sanatorium in Providence, Rhode Island. There they attempted to cure him by converting his addiction from cocaine to morphine. After being discharged from Butler in 1886, Halsted moved to Baltimore, Maryland, to join his friend William Welch at the soon-to-be-opened Johns Hopkins Hospital.

Halsted was named the first chief of the Department of Surgery at Johns Hopkins Hospital when it opened in May 1889. He was named surgeon-in-chief in 1890 and promoted to professor of surgery in 1892. At Johns Hopkins, Halsted was credited with starting the first formal surgical residency training program in the United States. Halsted’s surgical residency program consisted of an internship (the length was left undefined and individuals advanced once Halsted believed they were ready for the next level of training). Internship was followed by six years as an assistant resident and then two years as house surgeon. Halsted’s first resident was Frederick J. Brockway, who started in May 1889 but dropped out of the program in October 1890 to teach anatomy. Halsted went on to train many of the academic surgeons of the time including Harvey Cushing and Walter Dandy.

He is also known for many other medical and surgical achievements. As one of the first proponents of hemostasis and investigators of wound healing, Halsted pioneered modern surgical principles of control of bleeding, accurate anatomical dissection, complete sterility, exact approximation of tissue in wound closures without excessive tightness, and gentle handling of tissues. The first radical mastectomy for breast cancer was performed by Halsted (before this time, such a diagnosis was a virtual death sentence). Other achievements included the introduction of the surgical glove and advances in thyroid, biliary tree, hernia, intestinal and arterial aneurysm surgeries.

Though raised a Presbyterian, Halsted was an agnostic by adulthood.

In 1890, Halsted married Caroline Hampton, the niece of Confederate general Wade Hampton III. They purchased the High Hampton mountain retreat in North Carolina from Caroline's three aunts. There, Halsted raised dahlias and pursued his hobby of astronomy.

He died on September 7, 1922.