Haliburton was born in Windsor, Nova Scotia, the son of William Hersey Otis Haliburton, a lawyer, judge and political figure, and Lucy Chandler Grant. His mother died when he was a small child, and his father remarried when he was seven, giving him as stepmother Susanna Davis, the daughter of Michael Francklin, who had been Nova Scotia's Lieutenant Governor. He attended University of King's College in Windsor and became a lawyer, opening a practice in Annapolis Royal, the former capital of the colony.

Haliburton became a noted local businessman and a judge, but his great fame came from his writing. He wrote a number of books on history, politics and farm improvement. He rose to international fame with his Clockmaker serial, which first appeared in the Novascotian and was later published in book form throughout the British Empire. The books recounted the humorous adventures of the character Sam Slick and became extremely popular light reading.

From 1826 to 1829, Haliburton represented Annapolis County in the Nova Scotia House of Assembly.

Haliburton retired from law and moved to England in 1856. In that same year he married Sarah Harriet Owen Williams. In 1859, Haliburton was elected the Member of Parliament for Launceston, Cornwall, as a member of the Tory minority; he did not stand for re-election in 1865.

Haliburton received an honorary degree from Oxford for service to literature and continued writing until his death on 27 August 1865, at his home in Isleworth, near London.

While in England, Thomas Chandler Haliburton met Louisa Neville, daughter of Captain Laurence Neville, of the Eighth Light Dragoons, whom he married in 1816 and brought back to Nova Scotia. Her story before marriage is related in the "Haliburton Chaplet," edited by their son, Robert Grant Haliburton (Toronto: 1899). The couple had two sons and five daughters.

Louisa died in 1840, and was buried at Windsor. Haliburton married a second time in 1856, to Sarah Harriet Owen Williams, and died in England.

Haliburton County, Ontario, is named after Haliburton in recognition of his work as the first chair of the Canadian Land and Emigration Company.

In 1884, faculty and students at his alma mater founded a literary society in honor of the College's most celebrated man of letters. The Haliburton Club, still active at King's College, Halifax, is now the longest standing collegial literary society in the Commonwealth of Nations or North America.

His comment of him remembering "playing hurley on the ice" is the first known reference to hockey in Canada and is the basis of Windsor's claim to being the town that fathered hockey.

A memorial to Thomas and his first wife was erected in 1902 in Christ Church, Windsor, by four of their children: Laura Cunard, Lord Haliburton, and two surviving sisters.