James received the crown at the age of eight upon the death of his father, King James II. Scotland was governed first by James's mother, Mary of Gueldres (d. 1463), and James Kennedy, bishop of St. Andrews (d. 1465), and then by a group of nobles headed by the Boyds of Kilmarnock, who seized the king in 1466. In 1469 James overthrew the Boyds and began to govern for himself. Unlike his father, he was, however, unable to restore strong central government after his long minority. He evidently offended his nobles by his interest in the arts and by taking artists for his favourites. In 1479 he arrested his brothers, Alexander, Duke of Albany, and John, Earl of Mar, on suspicion of treason. Albany escaped to England, and in 1482 English troops entered Scotland and forced James to restore Albany to his domains. During this invasion dissident Scottish nobles hanged James's favourites. By March 1483 the king had recovered enough power to expel Albany.

Nevertheless, even without English aid to his discontented subjects, James was unable to ward off revolts. In 1488 two powerful border families, the Homes and the Hepburns, raised a rebellion and won to their cause his 15-year-old son, the future king James IV. James III was captured and killed after his defeat at the Battle of Sauchieburn, Stirling, on June 11.