Allen's mother was a comedian, and his father was a singer and foil for her in their vaudeville act. When Allen was 18 months old, his father died, and the young Allen moved to Chicago to live with his mother's family. He became a radio actor while in high school and studied journalism at two colleges before becoming a radio announcer in Phoenix, Arizona, in 1942. In 1948 he scored his first major success as host of a late-night radio show on station KNX in Los Angeles, California. The show provided Allen with a showcase for his spontaneous humour and featured his ad-libbed repartee with members of the studio audience, a device Allen would continue to employ effectively on his television talk shows.

Allen became a prominent figure on national television during the early 1950s, with both The Steve Allen Show (CBS, 1950–52) and his regular appearances as a panelist on the CBS game show What's My Line? He began hosting a local New York-based late-night show in July 1953; its format remained largely unchanged when, in September 1954, the NBC network broadcast the show nationally and rechristened it Tonight! (later renamed The Tonight Show (Tonight Show, The)). Allen was credited with introducing many of the trademarks of the talk show genre: the opening monologue, comic exchanges with the show's bandleader, comedy sketches, a simple set of desk and sofa, and casual banter with celebrity guests. Allen, an accomplished jazz pianist, typically delivered his opening monologue while seated at the piano, allowing him to punctuate his jokes with musical interjections. During Allen's reign, The Tonight Show was a showcase for comedy, jazz, and occasional serious shows that Allen would devote to a single topic (such as narcotics or civil rights) or a single guest (such as poet Carl Sandburg).

Allen hosted The Tonight Show for five nights per week and added a sixth night to his work schedule when in June 1956 he began hosting a new The Steve Allen Show on Sundays. In 1957 NBC demanded that Allen give up The Tonight Show in order to concentrate on the Sunday night program and build up its audience against the top-rated Ed Sullivan Show on CBS. Allen assembled top writers and performers for the new show; his regular supporting cast included Louis Nye, Don Knotts, Tom Poston, Bill Dana, Pat Harrington, Jr., Dayton Allen, Gabe Dell, and Allen's wife, actress Jayne Meadows. The show ended its run in 1961, after which Allen continued to host network and syndicated talk shows throughout the 1960s and early '70s.

Recurring comic routines and trademarks on all of his shows included his man-on-the-street interviews (usually featuring Nye as milquetoast Gordon Hathaway 【“Hi-ho, Steverino!”】, Knotts as a walking bundle of nerves, and Poston as the man who could never remember his name), a “Letters to the Editor” routine (in which Allen read real letters to newspaper editors while seething with mock rage and bombast), Allen's catchphrase of “smock-smock!”, and his own unmistakable high-pitched giggle, cited by critics as the most ingratiating laugh on television. His final successful series, Meeting of Minds, debuted on PBS in 1977. The show featured actors as prominent historical figures in a simulated talk-show format; Allen later stated that it was the show of which he was most proud.

Although Allen was best known for his television work, his accomplishments as actor, musician, composer, and author were also noteworthy. He appeared in several motion pictures, usually playing himself; his best-known screen performance was in The Benny Goodman Story (1955), in which Allen played the leading role of the legendary jazz clarinetist. A prolific author of more than 50 books, Allen wrote on such topics as politics, social criticism, music, and humour; he also wrote a series of mystery novels. As a composer or lyricist, Allen wrote songs and scores for several motion pictures, including the score for a television adaptation of Alice in Wonderland (1985). His popular songs include "Picnic," "Impossible," "The Gravy Waltz," and "This Could Be the Start of Something Big," Allen's theme song and best-known composition. In his later years, Allen became a prominent and vocal crusader for elevating the moral standards of the television industry.