Barry was born in Dublin. He is the son of the late Irish actress Joan O'Hara. He attended Catholic University School and Trinity College, Dublin, where he edited Icarus. His academic posts have included Honorary Fellow in Writing at the University of Iowa (1984), Villanova University (2006) and Writer Fellow at Trinity College, Dublin (1995-1996). Barry started his literary career with the novel Macker's Garden in 1982. This was followed by several books of poetry and a further novel The Engine of Owl-Light in 1987 before his career as a playwright began with his first play produced in the Abbey theater, Boss Grady's Boys in 1988.

Barry's maternal great-grandfather, James Dunne, provided the inspiration for the main character in his most internationally known play, The Steward of Christendom. The main character, named Thomas Dunne in the play, was the chief superintendent of the Dublin Metropolitan Police from 1913-1922. He oversaw the area surrounding Dublin Castle until the Irish Free State takeover on 16 January 1922. One of his grandfathers belonged to the British Army Corps of Royal Engineers.

Both The Steward of Christendom and the novel The Whereabouts of Eneas McNulty, are about the dislocations (physical and otherwise) of loyalist Irish people during the political upheavals of the early 20th century. The title character of the latter (McNulty), for instance, is a young man forced to leave Ireland by his former friends for his political beliefs during the Anglo-Irish War.

He also wrote Hinterland, a satirical play based loosely on former Taoiseach, Charles Haughey, the performance of which caused a minor controversy in Dublin. The Sunday Times, which did not review the play, criticized it as "feeble, puerile, trite, dissociated, shallow, exploitative and gratuitously offensive".

Barry's work in fiction came to the fore during the 1990s. His novel A Long Long Way was shortlisted for the 2005 Man Booker Prize, and was selected for Dublin's 2007 One City One Book event. The novel tells the story of Willie Dunne, a young recruit to the Royal Dublin Fusiliers during the First World War. It brings to life the divided loyalties that many Irish soldiers felt at the time following the Easter Rising in 1916. [Willie Dunne, son of the fictional Thomas Dunne, first appears as a minor but important character in "The Steward of Christendom."]

Barry's most recent book, The Secret Scripture won the James Tait Black Prize for fiction (announced in August 2009), the oldest such award in the UK, and the 2008 Costa Book of the Year (announced January 27, 2009). It was also a favourite to win the 2008 Man Booker Prize, narrowly losing out to Aravind Adiga's The White Tiger.

Sebastian Barry's new play is Andersen's English, and is inspired by children's writer Hans Christian Andersen coming to stay with Charles Dickens and his family in the Kent marshes. Directed by Max Stafford-Clark and produced by Out of Joint and Hampstead Theatre, it toured in the UK from 11 February to 8 May 2010.

Barry lives in County Wicklow with his family.