Manuel was a son of John V Palaeologus (reigned 1341–91 with interruptions) and Helena Kantakouzene and was named heir to the throne in 1373 after his older brother, Andronicus IV, led an unsuccessful revolt against their father. Manuel was crowned coemperor in September 1373 and, in 1379, helped his father regain Constantinople and the throne, which Andronicus had seized in 1376. John V and Manuel regained the throne with Turkish help and were forced to pay tribute to the sultan and lend him military aid. In 1390 John VII, son of Andronicus, seized Constantinople and the throne, but the Turks again helped Manuel and John regain it. Manuel was forced to live at the court of Bayezid I as a submissive vassal, remaining there until he escaped to Constantinople after learning of his father's death in February 1391.

When the Turks overran Thessaly and the Peloponnese in 1396, Manuel made a journey to western Europe to appeal for help against them. He was graciously received in Rome, Milan, London, and Paris; he stayed in the French city for two years. His visit did much to promote cultural ties between Byzantium and the West, but military aid was not forthcoming.

Manuel arranged a peace treaty (1403) with Bayezid's successor, Mehmed I, recovering Thessalonica (modern Thessaloníki, Greece) and putting an end to tribute payments. Peaceful relations persisted until 1421, when Mehmed died, and Manuel withdrew from state affairs to pursue his religious and literary interests. His son and coemperor, John VIII, ignored the tenuous bond that had been established and in 1421 supported a pretender, Mustafa, against the rightful heir to the Turkish throne, Murad II. Murad put down the revolt and in 1422 besieged Constantinople. The city survived, but the Turks overran the Peloponnese (1423). After being forced to sign a humiliating treaty, Manuel retired to a monastery.