Bennett was born in a modest house in Hanley in the Potteries district of Staffordshire. Hanley is one of a conurbation of six towns which joined together at the beginning of the twentieth century as Stoke-on-Trent. Enoch Bennett, his father, qualified as a solicitor in 1876, and the family were able to move to a larger house between Hanley and Burslem. The younger Bennett was educated locally in Newcastle-under-Lyme.

Arnold was employed by his father - his duties included rent collecting. He was unhappy working for his father for little financial reward, and the theme of parental miserliness is important in his novels. In his spare time he was able to do a little journalism, but his breakthrough as a writer was to come after he had moved from his native Potteries. At the age of twenty-one, he left his father's practice and went to London as a solicitor's clerk.

Bennett won a literary competition in Tit-Bits magazine in 1889 and was encouraged to take up journalism full time. In 1894, he became assistant editor of the periodical Woman. He noticed that the material offered by a syndicate to the magazine was not very good, so he wrote a serial which was bought by the syndicate for 75 pounds. He then wrote another. This became The Grand Babylon Hotel. Just over four years later, his first novel, A Man from the North, was published to critical acclaim and he became editor of the magazine.

From 1900 he devoted himself full time to writing, giving up the editorship and writing much serious criticism, and also theatre journalism, one of his special interests. He moved to Trinity Hall Farm, Hockliffe, Bedfordshire, on Watling Street, which was the inspiration for his novel Teresa of Watling Street, which was published in 1904. His father died there in 1902 and is buried in Chalgrove churchyard. In 1902, Anna of the Five Towns, the first of a succession of stories which detailed life in the Potteries, appeared.

In 1903, he moved to Paris, where other great artists from around the world had converged on Montmartre and Montparnasse. Bennett spent the next eight years writing novels and plays. In 1908 The Old Wives' Tale was published and was an immediate success throughout the English speaking world. After a visit to America in 1911, where he had been publicised and acclaimed as no other visiting writer since Dickens, he returned to England where Old Wives' Tale was reappraised and hailed as a masterpiece.

During the First World War he became Director of Propaganda for France at the Ministry of Information. His appointment was made directly on the recommendation of Lord Beaverbrook, who also recommended him as Deputy Minister of that Department at the end of the war. He refused a knighthood in 1918. He won the 1923 James Tait Black Memorial Prize for his novel Riceyman Steps and in 1926, at the suggestion of Lord Beaverbrook, he began writing an influential weekly article on books for the Evening Standard newspaper.

Osbert Sitwell, in a letter to James Agate, notes that Bennett was not, despite current views, "the typical businessman, with his mean and narrow outlook". Sitwell cited a letter from Bennett to a friend of Agate, who remains anonymous, in Ego 5:

I find I am richer this year than last; so I enclose a cheque for 500 pounds for you to distribute among young writers and artists and musicians who may need the money. You will know, better than I do, who they are. But I must make one condition, that you do not reveal that the money has come from me, or tell anyone about it.

He separated from his French wife in 1922 and fell in love with the actress Dorothy Cheston, with whom he stayed for the rest of his life. He died of typhoid at his home in Baker Street, London, on 27 March 1931, after returning from a visit to France. His ashes are buried in Burslem cemetery. Their daughter, Virginia Eldin, lived in France and was president of the Arnold Bennett Society.

His most famous works are the Clayhanger trilogy and The Old Wives' Tale. These books draw on his experience of life in the Potteries, as did most of his best work. In his novels the Potteries are referred to as "the Five Towns"; Bennett felt that the name was more euphonious than "the Six Towns", so Fenton was omitted.

The real towns and their Bennett counterparts are:

All but one of thse are mild disguises; "Knype" may possibly be taken from the nearby village of Knypersley near Biddulph, and Knypersley Hall. Neighbouring Oldcastle, where Edwin Clayhanger went to school, is Newcastle under Lyme.

Bennett believed that ordinary people had the potential to be the subject of interesting books. In this respect, an influence which Bennett himself acknowledged was the French writer Maupassant whose "Une Vie" inspired "The Old Wives' Tale". Maupassant is also one of the writers on whom Richard Larch, the protagonist of Bennett's first (and obviously semi-autobiographical) novel, A Man from the North, tries in vain to model his own writing.

As well as the novels, much of Bennett's non-fiction work has stood the test of time. One of his most popular non-fiction works, which is still read to this day, is the self-help book "How to Live on 24 Hours a Day". His diaries have yet to be published in full, but extracts from them are often quoted in the British press. Bennett also wrote for the stage and the screen. His novel Buried Alive was made into the 1912 movie The Great Adventure and the 1968 musical Darling of the Day. Over the years, several of his other books have been made into films (for example The Card starring Alec Guinness) and television mini-series (such as "Anna of the Five Towns" and "Clayhanger").

Critically, Bennett has not always had an easy ride. His output was prodigious and, by his own admission, based on maximising his income rather than from creative necessity. As Bennett put it:

"Am I to sit still and see other fellows pocketing two guineas apiece for stories which I can do better myself? Not me. If anyone imagines my sole aim is art for art’s sake, they are cruelly deceived."

Contemporary critics — Virginia Woolf in particular — perceived weaknesses in his work. To her and other Bloomsbury authors, Bennett represented the "old guard" in literary terms. His style was traditional rather than modern, which made him an obvious target for those challenging literary conventions. Max Beerbohm criticized him as a social climber who had forgotten his origins. He drew a mature and well fed Bennett expounding "All to plan, you see" to a younger tougher version of himself, who replies: "Yes - but MY plan".

For much of the 20th Century, Bennett's work was tainted by this perception; it was not until the 1990s that a more positive view of his work became widely accepted. The noted English critic John Carey was a major influence on his rehabilitation. He praises him in his 1992 book, The Intellectuals and the Masses., declaring Bennett to be his "hero" because his writings "represent a systematic dismemberment of the intellectuals' case against the masses".

Bennett is one of a select number of celebrities to have a dish named after them. While staying at the Savoy Hotel in London, the chefs perfected an omelette incorporating smoked haddock, which pleased the author so much he insisted on it being prepared wherever he travelled. The 'Omelette Arnold Bennett' has remained a Savoy standard dish ever since.