Goldman grew up in a Jewish family in Highland Park, Illinois, a Chicago suburb, and obtained a BA degree at Oberlin College in 1952 and an MA degree at Columbia University in 1956.His brother was the late James Goldman, author and playwright.

William Goldman had published five novels and had three plays produced on Broadway before he began to write screenplays. Several of his novels he later used as the foundation for his screenplays.

In the 1980s he wrote a series of memoirs looking at his professional life on Broadway and in Hollywood (in one of these he famously remarked that "Nobody knows anything"). He then returned to writing novels. He then adapted his novel The Princess Bride to the screen, which marked his re-entry into screenwriti