Goldsmith's birth date and year are not known with certainty. According to the Library of Congress authority file, he told a biographer that he was born on 29 November 1731, or perhaps in 1730. Other sources have indicated 10 November, on any year from 1727 to 1731. 10 November 1730 is now the most commonly accepted birth date. Neither is the location of his birthplace certain. He was born either in the townland of Pallas, near Ballymahon, County Longford, Ireland, where his father was the Anglican curate of the parish of Forgney, or at the residence of his maternal grandparents, at the Smith Hill House in the diocese of Elphin, County Roscommon, where his grandfather Oliver Jones was a clergyman and master of the Elphin diocesan school. When he was two years old, Goldsmith's father was appointed the rector of the parish of "Kilkenny West" in County Westmeath. The family moved to the parsonage at Lissoy, between Athlone and Ballymahon, and continued to live there until his father's death in 1747.

In 1744 Goldsmith went up to Trinity College, Dublin. Neglecting his studies in theology and law, he fell to the bottom of his class. His tutor was Theaker Wilder. He was graduated in 1749 as a Bachelor of Arts, but without the discipline or distinction that might have gained him entry to a profession in the church or the law; his education seemed to have given him mainly a taste for fine clothes, playing cards, singing Irish airs and playing the flute. He lived for a short time with his mother, tried various professions without success, studied medicine desultorily at the University of Edinburgh and the University of Leiden, and set out on a walking tour of Flanders, France, Switzerland and Northern Italy, living by his wits (busking with his flute).

He settled in London in 1756, where he briefly held various jobs, including an apothecary's assistant and an usher of a school. Perennially in debt and addicted to gambling, Goldsmith produced a massive output as a hack writer for the publishers of London, but his few painstaking works earned him the company of Samuel Johnson, with whom he was a founding member of "The Club". The combination of his literary work and his dissolute lifestyle led Horace Walpole to give him the epithet inspired idiot. During this period he used the pseudonym "James Willington" (the name of a fellow student at Trinity) to publish his 1758 translation of the autobiography of the Huguenot Jean Marteilhe.

Goldsmith was described by contemporaries as prone to envy, a congenial but impetuous and disorganised personality who once planned to emigrate to America but failed because he missed his ship.

His premature death in 1774 may have been partly due to his own misdiagnosis of his kidney infection. Goldsmith was buried in Temple Church. The inscription reads; "HERE LIES/OLIVER GOLDSMITH". There is a monument to him in the center of Ballymahon, also in Westminster Abbey with an epitaph written by Samuel Johnson.

Goldsmith wrote this romantic ballad of precisely 160 lines in 1765. The hero and heroine are Edwin, a youth without wealth or power, and Angelina, the daughter of a lord "beside the Tyne." Angelina spurns many wooers, but refuses to make plain her love for young Edwin. "Quite dejected with my scorn," Edwin disappears and becomes a hermit. One day, Angelina turns up at his cell in boy's clothes and, not recognizing him, tells him her story. Edwin then reveals his true identity, and the lovers never part again. The poem is notable for its interesting portrayal of a hermit, who is fond of the natural world and his wilderness solitude but maintains a gentle, sympathetic demeanor toward other people. In keeping with eremitical tradition, however, Edwin the Hermit claims to "spurn the [opposite] sex." This poem appears under the title of "A Ballad" sung by the character of Mr. Burchell in Chapter 8 of Goldsmith's novel, The Vicar of Wakefield.

In 1760, Goldsmith began to publish a series of letters in the Public Ledger under the title The Citizen of the World. Purportedly written by a Chinese traveler in England named Lien Chi, they used this fictional outsider's perspective to comment ironically and at times moralistically on British society and manners. It was inspired by the earlier essay series Persian Letters by Charles de Secondat, baron de Montesquieu.

The ironic poem, An Elegy on the Death of a Mad Dog was published in 1766. He is also thought to have written the classic children's tale The History of Little Goody Two-Shoes.

Goldsmith lived in Kingsbury, London, between 1771 – 1774 and there is a school named after him there called the Oliver Goldsmith Primary School. In the play Marx In Soho by Howard Zinn, Marx makes a reference to Goldsmiths' poem, The Deserted Village. A statue of him stands at the Front Arch of Trinity College, Dublin. His name has been given to a new lecture theater and student accommodation on the Trinity College campus, Goldsmith Hall. Somerset Maugham used the last line from An Elegy On The Death Of A Mad Dog in his novel The Painted Veil (1925). The character Walter Fane's last words are The dog it was that died. Auburn, Alabama and Auburn University were named for the first line in Goldsmith's poem: "Sweet Auburn, loveliest village on the plain." Auburn is still referred to as the 'loveliest village on the plains.' There is a statue in Ballymahon County Longford. London Underground locomotive number 16 (used on the Metropolitan line of the London Underground until 1962) was named Oliver Goldsmith.