Born on August 23, 1868 to Emma J. Dexter and Hardin Wallace Masters in Garnett, Kansas, his father had briefly moved to set up a law practice. The family soon moved back to his paternal grandparents' farm near Petersburg in Menard County, Illinois. In 1880 they moved to Lewistown, Illinois, where he attended high school and had his first publication in the Chicago Daily News. The culture around Lewistown, in addition to the town's cemetery at Oak Hill, and the nearby Spoon River were the inspirations for many of his works, most notably Spoon River Anthology, his most famous and acclaimed work.
Masters attended The Knox Academy from 1889–1890, a defunct preparatory program run by Knox College, but was forced to leave due to his family's inability to finance his education.
After working in his father's law office, he was admitted to the Illinois bar and moved to Chicago, where he established a law partnership with Kickham Scanlan in 1893. He married twice. In 1898, he married Helen M. Jenkins, the daughter of a lawyer in Chicago, and had three children. During his law partnership with Clarence Darrow, from 1903 to 1908, Masters defended the poor. In 1911, he started his own law firm, despite the three years of unrest (1908–1911) due to extramarital affairs and an argument with Darrow.
Two of his children followed him with literary careers. His daughter Marcia pursued poetry, while his son, Hilary Masters became a novelist. Hilary and his half-brother Hardin wrote a memoir of their father.
Masters died at a nursing home on March 5, 1950, in Melrose Park, Pennsylvania, age 81. He is buried in Oakland cemetery in Petersburg, Illinois. His epitaph includes his poem, "To-morrow is My Birthday" from Toward the Gulf (1918).