Born in Preston, Lancashire, his father Charles was a doctor who had converted to Roman Catholicism, following his brother Edward Healy Thompson, a friend of Cardinal Manning.

Thompson was educated at Ushaw College, near Durham, and then studied medicine at Owens College in Manchester. He took no real interest in his studies and never practised as a doctor, moving instead to London to try and become a writer. Here he was reduced to selling matches and newspapers for a living.

During this time, he became addicted to opium, which he first had taken as a remedy for ill health. Thompson came to London in 1885 and lived a life of destitution until in 1888 he was 'discovered' after he sent poetry to the magazine Merrie England. He was sought out by the editors of 'Merrie England', Wilfrid and Alice Meynell and rescued from the verge of starvation and self-destruction. Recognizing the value of his work, the couple gave him a home and arranged for publication of his first book, Poems in 1893. The book attracted the attention of sympathetic critics in the St James's Gazette and other newspapers, and Coventry Patmore wrote a eulogistic notice in the Fortnightly Review of January 1894.

Subsequently Thompson lived as an invalid in Wales and at Storrington. A lifetime of extreme poverty, ill-health, and an addiction to opium took a heavy toll on Thompson, even though he found success in his last years. Thompson attempted suicide in his nadir of despair, but was saved from completing the action through a vision which he believed to be that of a youthful poet, Thomas Chatterton, who had committed suicide almost a century earlier. Shortly afterwards, a prostitute - whose identity Thompson never revealed - befriended him, gave him lodgings and shared her income with him. Thompson was later to describe her in his poetry as his saviour. She soon disappeared, however, never to return. He would eventually die from tuberculosis, at the age of 48.

His most famous poem, The Hound of Heaven describes the pursuit of the human soul by God. This poem is the source of the phrase, "with all deliberate speed," used by the Supreme Court in Brown II, the remedy phase of the famous decision on school desegregation. A phrase in his The Kingdom of God is the source of the title of Han Suyin's novel and the movie Love is a Many-Splendored Thing. In addition, Thompson wrote the most famous cricket poem, the nostalgic At Lord's. He also wrote Sister Songs (1895), New Poems (1897), and a posthumously published essay, "Shelley" (1909). He wrote a treatise On Health and Holiness, dealing with the ascetic life, which was published in 1905.

G. K. Chesterton said shortly after his death that "with Francis Thompson we lost the greatest poetic energy since Browning." His grave is in St.Mary's Roman Catholic Cemetery in London.

Among Thompson's devotees was the young J.R.R. Tolkien, who purchased a volume of Thompson's works in 1913-1914, and later said that it was an important influence on his own writing.The American novelist Madeleine L'Engle used a line from the poem "The Mistress of Vision" as the title of her last Vicki Austin novel, Troubling a Star.