Thurman was born in Salt Lake City to Beulah and Oscar Thurman. Between his mother's many marriages, Wallace Thurman and his mother lived with Emma Jackson, his maternal grandmother. His grandmother's home doubled as a saloon where alcohol was served without a license. When Thurman was less than a month old, his father abandoned and lived apart from his wife and son. The two did not meet until the younger Thurman was 30 years old.[
Thurman's early life was marked by loneliness, family instability and poor health. He began grade school at age six in Boise, Idaho but poor health eventually led to a two-year absence from school during which he returned to Salt Lake City. Thurman lived in Chicago from 1910 to 1914 but finished grammar school in Omaha, Nebraska. During this time, he suffered from persistent heart attacks, and came down with influenza in the winter of 1918 while living in the lower altitude of Pasadena, California. He returned to Salt Lake City and finished high school. Throughout it all, Thurman was a voracious reader, writing his first novel at the age of 10. He enjoyed the works of Plato, Aristole, Shakespeare, Havelock Ellis, Flaubert, Charles Baudelaire and many others. He attended the University of Utah from 1919 to 1920 as a pre-medical student. Later, in 1922, he transferred to the University of Southern California in Los Angeles but left without receiving a degree. While in Los Angeles, he met and befriended Arna Bontemps and became a reporter for an African-American owned newspaper where he wrote his first (ultimately short-lived) column. Thurman also started his first magazine while in Los Angeles called Outlet which was supposed to be the equivalent of The Crisis.
In 1925 he moved to Harlem. In less than 10 years, he obtained various employments as a publisher, and editor for magazines and a major publisher, a writer of novels, plays, and articles, and at various times he served as a ghostwriter to various persons. The following year he became the editor of The Messenger, a socialist journal aimed at black audiences. While at The Messenger, Thurman became the first to publish the adult-themed stories of Langston Hughes. Thurman left the Messenger in October 1926 to become the editor of a white-owned magazine called World Tomorrow. The following month, he collaborated in publishing the literary magazine Fire!! Devoted to the Younger Negro Artists whose contibutors were Hughes, Zora Neale Hurston, Richard Bruce Nugent, Aaron Douglas, Gwendolyn B. Bennett and others. Only one issue of Fire!! was ever published. Fire!! challenged the ideas of W.E.B. DuBois who believed that black art should serve as propaganda, and many within the African American bourgeoisie who sought social equality and racial integration. Thurman attempted to show the real lives of African Americans, both the good and the bad. He stated that black artists should be more objective in their writings and not so self-conscious that they did not acknowledge and celebrate the arduous conditions of African American lives. This was in contrast to African American leaders and middles class who saw the goal of the New Negro movement as showing white Americans that blacks were not inferior.
During this time, Thurman's rooming house apartment at 267 West 136th Street in Harlem became the main place where the African American literary avant-garde and visual artists of the Harlem Renaissance met and socialized. Thurman and Hurston mockingly called the room Niggerati Manor, in reference to all of the black literati who showed up there. The walls of "Niggerati Manor" were painted red and black, colors to be emulated on the cover of Fire!! Thurman, Hughes, Nugent and others were described as unconventional by Jessie Redmon Fauset. Nugent painted murals on the walls, some of which contained homoerotic content.
In 1928, Thurman published another magazine called Harlem: a Forum of Negro Life whose contibutors included Alain Locke, George Schuyler, and Alice Dunbar-Nelson. The publication lasted for only two issues. Afterwards, Thurman became a reader for a major publishing company. He was the first African American in such a position in a New York publishing house.
Thurman married Louise Thompson Patterson on August 22, 1928. The marriage lasted only six months. Thompson said that Wallace was a homosexual and thus their union was incompatible. 
Thurman died at the age of 32 from tuberculosis, which many suspect was exacerbated by his long fight with alcoholism.
According to Langston Hughes, who also referenced Thurman's very dark complexion in this statement, Thurman was "...a strangely brilliant black boy, who had read everything and whose critical mind could find something wrong with everything he read." Though it was to become the basis for some of his strongest writings, from the very beginning Thurman's very dark skin color was an issue and prompted negative comments and reactions from various black and white Americans.
Thurman wrote a play, Harlem, which debuted on Braodway in 1929 to mixed reviews. The same year his novel The Blacker the Berry: A Novel of Negro Life was published. The novel is now recognized as a groundbreaking work of fiction because of its focus on intraracial prejudice, specifically between light-skinned and dark-skinned black people.
Three years later Thurman published Infants of the Spring, a satire of the themes and the individuals of the Harlem Renaissance. He co-authored a final novel with A.L. Furman, The Interne, published in 1932.