Paine was born in New Bedford, Massachusetts and moved to Bentonsport, Iowa at the age of 1. He later moved to St. Louis, where he trained as a photographer, and became a dealer in photographic supplies in Fort Scott, Kansas. Paine sold out in 1895 to become a full-time writer, moving to New York. He spent most of his life in Europe, including France where he wrote two books about Joan of Arc. This work was so well received in France that he was awarded the title of Chevalier in the Légion d'honneur by the French government.

Paine wrote several children's books, the first of which was published in 1898. For a time he served as an editor of St. Nicholas Magazine, a leading children's periodical of the time. He went on to write about his travelling adventures, including The Tent Dwellers, written about a trout fishing trip to Nova Scotia. His 1901 book The Great White Way written about the Arctic indirectly gave New York City's Broadway the name "Great White Way"

He was the official biographer and literary executor for Mark Twain, and worked with him (and on his behalf after his death) on various projects. His work on Twain's unfinished story The Mysterious Stranger saw him combine three versions of the story into one.

Paine was married to Dora and had three daughters.

Partial bibliography of Albert Bigelow Paine:

• Rhymes by Two Friends with William Allen White (1893)
• The Mystery of Evelin Delorme, A Hypnotic Story (1894)
• The Hollow Tree Series:
• The Hollow Tree and Deep Woods Book (1898)
• The Hollow Tree Snowed-In Book (1901)
• Hollow Tree Nights and Days (1915)
• The Arkansas Bear (1898)
• The Bread Line (1900)
• The Great White Way (1901)
• A Strenuous Quest for a Home (1901)
• A Little Garden Calendar (1905)
• The Tent Dwellers (1908)
• Mark Twain: A Biography, 4 volumes (1912)
• The Boy's Life of Mark Twain (1916)
• Mark Twain's Letters, 2 volumes (editor, 1917)
• A Short Life of Mark Twain (1920)
• Mark Twain's Speeches (editor, 1923)
• Life and Lillian Gish (1932) – biography of Lillian Gish
• Golden Cat (1934)
• Captain Bill McDonald, Texas Ranger: A Story of Frontier Reform, a biography of Texas Ranger William Jesse McDonald
• Biography of George Fisher Baker (?)
• The Car That Went Abroad (?)
• The Ship Dwellers (?)
• Deep Woods (?)