Samuel Crompton was born at 10 Firwood Fold, Bolton, Lancashire, to George and Betty Crompton (née Elizabeth Holt of Turton). Samuel had two younger sisters. While he was a boy he lost his father, and had to contribute to the family resources by spinning yarn. The defects of the spinning jenny imbued him with the idea of devising something better, and for five or six years the effort absorbed all his spare time and money, including what he earned by playing the violin at the Bolton theatre.

On 16 February 1780 at Bolton Parish Church, Crompton married Mary Pimlott (or Pimbley). They had eight children including George Crompton (born 8 January 1781), who followed in the family business.

About 1779 Samuel Crompton succeeded in producing a machine which spun yarn suitable for use in the manufacture of muslin, and which was known as the muslin wheel or the Hall i' th' Wood (pronounced Hall-ith-wood) wheel, from the name of the house in which he and his family resided. The muslin wheel later became known as the spinning mule. About the same time, a good demand arose for the yarn which Crompton made at Hall i' th' Wood. However, in the absence of means to take out a patent, the prying, to which his methods were subjected, drove Crompton to the choice of either destroying his machine or making it public. He adopted the latter alternative on the promise by a number of manufacturers to pay him for the use of the mule, but all he received was about £60. He then resumed spinning on his own account, but with indifferent success.

In 1800 a sum of £500 was raised for his benefit by subscription, and when in 1809 Edmund Cartwright, the inventor of the power loom, obtained £10,000 from parliament, Crompton determined also to apply for a grant. In 1811 he toured the manufacturing districts of Lancashire and Scotland to collect evidence showing how extensively his mule was used, and in 1812 parliament awarded him £5,000. With the aid of this money Crompton embarked in business, first as a bleacher and then as a cotton merchant and spinner, but again without success. In 1824 some friends, without his knowledge, bought him an annuity of £63.

Crompton died at his house in King Street, Bolton on 26 June 1827, and was buried at the local parish church.