An older brother of the literary critic Sir Leslie Stephen, Sir James practiced law from 1854 and contributed articles on a wide range of topics to various periodicals, especially the Pall Mall Gazette. His General View of the Criminal Law of England (1863) was the first attempt after Sir William Blackstone's Commentaries on the Laws of England (1765–69) to state systematically the principles of English criminal jurisprudence. Even more ambitious was his History of the Criminal Law of England (1883), an impressive work despite his dogmatism and occasionally uncritical use of sources. Liberty, Equality, Fraternity (1873) elaborated his antidemocratic political philosophy in reply to John Stuart Mill's On Liberty (1859).

As the member of the British viceroy's council in India (1869–72) responsible for legal matters, Stephen devoted himself to the codification and reform of Indian law. Subsequently he prepared digests of the English law of evidence (1876) and criminal law (1877). Political opposition prevented the introduction of his Indictable Offences Bill (actually a comprehensive criminal code) in the House of Commons. From 1879 to 1891 he was a judge of the Queen's Bench Division of the English court system. In 1891 he was created a baronet.