Paton was born in Pietermaritzburg, Natal Province (now KwaZulu-Natal), the son of a minor civil servant. After attending Maritzburg College, he earned a Bachelor of Science degree at the University of Natal in his hometown, followed by a diploma in education. After graduation, Paton worked as a teacher, first at the Ixopo High School, and subsequently at a Pietermaritzburg high school While at Ixopo he met Dorrie Francis Lusted. They were married in 1928 and remained together until her death from emphysema in 1967. Their life together is documented in Paton's book Kontakion for You Departed, published in 1969. Paton and his secretary, Anne Hopkins, were married the same year.

He served as the principal of the Diepkloof Reformatory for young (African) offenders from 1935 to 1948, where he introduced controversial reforms of a progressive slant. Most notable among these were the open dormitory policy, the work permit policy, and the home visitation policy. Boys were initially housed in closed dorms. Once they had proven themselves trustworthy, they would be transferred to open dorms within the compound. Boys who showed high levels of trustworthiness would be permitted to work outside the compound. In some cases, boys were even permitted to reside outside the compound under the supervision of a care family. Interesting to note is that fewer than 1% of ten thousand boys given home leave during Paton's years at Diepkloof ever broke their trust by failing to return.

Paton volunteered for service during World War II, but was refused. After the war he took a trip, at his own expense, to tour correctional facilities across the world. He toured Scandinavia, England, continental Europe, and the United States of America. During his time in Norway, he began work on his seminal novel Cry, The Beloved Country, which he would complete over the course of his journey, finishing it on Christmas Eve in San Francisco in 1946. There, he met Aubrey and Marigold Burns, who read his manuscript and found a publisher to publish it. The editor Maxwell Perkins, noted for editing novels of Ernest Hemingway and Thomas Wolfe, would guide Paton's first novel through publication with Scribner's.

In 1948, four months after the publication of Cry, The Beloved Country, the separatist National Party came to power in South Africa. In 1953 Paton founded the South African Liberal Party, which fought against the apartheid legislation introduced by the National Party. He remained the president of the SALP until its forced dissolution by the apartheid regime in the late 1960s, officially because its membership comprised both blacks and whites. Paton was a friend of Bernard Friedman, founder of the Progressive Party (South Africa). Paton's writer colleague Laurens van der Post, who had moved to England in the 1930s, helped the party in many ways. Van der Post knew that the South African Secret Police was aware that he was paying money to Paton, but could not stop it by legal procedures. Paton himself was noted for his peaceful opposition to the apartheid system, as were many others in the party, though some did take a more direct, violent route. Consequently, the party did have some stigma attached to it as a result of these actions. Paton's passport was confiscated on his return from New York in 1960, where he had been presented with the annual Freedom Award. It was not returned for another ten years.

Paton retired to Botha's Hill, where he resided until his death. He is honored at the Hall of Freedom of the Liberal International organization.

Paton's second and third novels, Too Late the Phalarope (1953) and Ah, but Your Land is Beautiful (1981), and his short stories, Tales From a Troubled Land (1961), all deal with the same racial themes that concerned the author in his first novel. Ah, but Your Land is Beautiful was built on parallel life stories, letters, speeches, news and records in legal proceedings, and mixed fictional and real-life characters, such as Donald Molteno, Albert Lutuli and Hendrik Verwoerd. The novel was in essence historical fiction, giving an accurate account of the resistance movement in South Africa during the 1960s. "Paton attempts to imbue his characters with a humanity not expected of them. In this novel, for example, we meet the supposedly obdurate Afrikaner who contravenes the infamous Immorality Act. There are other Afrikaners, too, who are led by their consciences and not by rules, and regulations promulgated by a faceless, monolithic parliament." (from Post-Colonial African Writers, ed. by Pushipa Naidu Parekh and Siga Fatima Jagne, 1998)

Paton was a prolific essay writer, his theme once again being the race and politics of South Africa. In Save the Beloved Country Paton plays on the famous title of his first novel but keeps a serious tone throughout discussing many of the famous personalities and issues on various sides of the South Africa's apartheid struggle. His Anglican faith was another factor in his life and work, as may be gleaned from the title of Instrument of Thy Peace. Paton wrote two autobiographies: Towards the Mountain deals with Paton's life leading up to and including the publication of Cry, the Beloved Country (an event that changed the course of his life) while Journey Continued takes its departure from that time onwards. He wrote biographies of others as well. His friend Jan Hendrik Hofmeyr was honored thus in Hofmeyr as was another friend, Geoffrey Clayton, in Apartheid and the Archbishop. Another form that interested him throughout his life was poetry; the biographer Peter Alexander includes many of these poems in his biography of Alan Paton.

Two recent publications of Paton's work include travel writing -- The Lost City of the Kalahari (2006); and a new complete selection of his shorter writings -- The Hero of Currie Road.

Paton was a devout Anglican. His faith was apparent in his works, Cry, The Beloved Country being an example. Paton was very well educated, and is believed to be one of the great minds of Africa. His personal motto was, "South Africa must be saved one person at a time."

• Cry, The Beloved Country, 1948 - film 1951, dir. by Zoltan Korda
• Lost in the Stars 1950 (with Maxwell Anderson - set to music by Kurt Weill)
• Too Late the Phalarope, 1953
• The Land and People of South Africa, 1955
• South Africa in Transition, 1956
• Debbie Go Home, 1960
• Tales from a Troubled Land, 1961
• Hofmeyer, 1964
• South African Tragedy, 1965
• Spono, 1965 (with Krishna Shah)
• The Long View, 1967
• Instrument of Thy Peace, 1968
• Kontakio For You Departed, 1969 (also: For You Departed)
• Case History of a Pinky, 1972
• the Life and Times of Geoffrey Clayton, Archbishop of Cape Town, 1973
• Knocking on the Door, 1975
• Towards the Mountain, 1980
• Ah, but Your Land is Beautiful, 1981
• An Autobiography, 1988
• Save the Beloved Country, 1989
• the complete short pieces, 2008

Cry, The Beloved Country has been filmed twice (in 1951 and 1995) and was the basis for the Broadway musical Lost in the Stars (adaptation by Maxwell Anderson, music by Kurt Weill).

The Alan Paton Award for non-fiction is conferred annually in his honour.