Cain was born into an Irish Catholic family in Annapolis, Maryland. The son of a prominent educator and an opera singer, he had inherited his love for music from his mother, but his high hopes of starting a career as a singer himself were thwarted when she told him that his voice was not good enough. After graduating from Washington College where his father, James W. Cain served as president, in 1910, Cain began working as a journalist for the Baltimore Sun.

Cain was drafted into the United States Army and spent the final year of World War I in France writing for an Army magazine.

Back in the States, he continued working as a journalist writing editorials for the New York World and articles for American Mercury. He briefly served as the managing editor of The New Yorker, but later turned to screenplays and finally to fiction.

Although Cain spent many years in Hollywood working on screenplays, his name only appears on the credits of three films: Algiers, Stand Up and Fight, and Gypsy Wildcat.

Cain's first novel, The Postman Always Rings Twice, was published in 1934. Two years later the serialized Double Indemnity was published. Cain made use of his love of music and of the opera in particular in at least three of his novels: Serenade (about an American opera singer who loses his voice and who, after spending part of his life south of the border, re-enters the States illegally with a Mexican prostitute in tow); Mildred Pierce (in which, as part of the subplot, the only daughter of a successful businesswoman trains as an opera singer); and Career in C Major, a short semi-comic novel about the unhappy husband of an aspiring opera singer who unexpectedly discovers that he has a better voice than she does (Cain's fourth wife, Florence Macbeth, was a retired opera singer).

Cain was married to Mary Clough in 1919. The marriage ended in divorce and he promptly married Elina Sjösted Tyszecka. Although Cain never had any children of his own, he was close to Elina's two children from a prior marriage. In 1944 Cain married film actress Aileen Pringle, but the marriage was a tempestuous union and dissolved in a bitter divorce two years later. Cain married for the fourth time to Florence Macbeth, an opera singer. Their marriage lasted until her death in 1966.

Cain continued writing up to his death at the age of 85. However, the many novels he published from the late 1940s onward never rivaled his earlier successes.
"I make no conscious effort to be tough, or hard-boiled, or grim, or any of the things I am usually called. I merely try to write as the character would write, and I never forget that the average man, from the fields, the streets, the bars, the offices, and even the gutters of his country, has acquired a vividness of speech that goes beyond anything I could invent, and that if I stick to this heritage, this logos of the American countryside, I shall attain a maximum of effectiveness with very little effort."

(from the Preface to Double Indemnity)