Born in New York City, to Irish immigrants Margaret and Patrick Donleavy, and receiving his education at various schools in the United States, he served in the US Navy during World War II. After the war ended, he moved to Ireland. In 1946 he began studying at Trinity College, Dublin, but left in 1949 before taking a degree.

Donleavy declared himself to be an atheist at the age of 14. In 1946, he married Valerie Heron; the couple had two children: Philip (born 1951) and Karen (born 1955). They divorced in 1969 and he remarried in 1970 to Mary Wilson Price; that union ended in divorce in 1989. In 2011, it was reported that Donleavy had not fathered his two children with Price. A DNA test in the early 1990s had confirmed that Rebecca was the daughter of brewing scion Kieran Guinness, and Rory was the son of Kieran’s older brother Finn, whom Price married after her divorce from Donleavy. “My interest is only to look after the welfare of the child,” Donleavy told The Times, “and after a certain stage, you can’t worry about their parentage”.

Donleavy’s first published work was a short story entitled A Party on Saturday Afternoon, which appeared in the Dublin literary periodical Envoy in 1950. He gained critical acclaim with his first novel, The Ginger Man (1955), which is one of the Modern Library 100 best novels. The novel, of which Donleavy’s friend and fellow writer Brendan Behan was the first person to read the completed manuscript, was banned in Ireland and the United States by reason of obscenity. Lead character Sebastian Dangerfield was in part based on Trinity College companion Gainor Crist, an American Navy veteran also studying at Trinity College on the G.I. Bill, whom Donleavy once described in an interview as a “saint”, though of a Rabelaisian kind.

In March 2007, Donleavy was the castaway on BBC Radio 4’s Desert Island Discs.

In 2015, Donleavy was the recipient of the Bob Hughes Lifetime Achievement Award at the Bord Gáis Energy Irish Book Awards.

In 2016, Trinity College Dublin awarded him with an honorary doctorate.