Oursler grew up in Baltimore, the poor son of a city transit worker. His childhood passions were reading and stage magic. He was raised in a devout Baptist family, but at fifteen he declared himself an agnostic. While still in his teens, he got a reporter's job for the Baltimore American and married Rose Karger. They had two children, but the marriage ended in divorce.

Oursler moved to New York City to edit a music trade magazine. He freelanced for a variety of publications early on. His short stories appeared in The Black Cat, Detective Story Magazine, The Thrill Book, and especially Mystery Magazine. Many of his stories, like "The Magician Detective" (Mystery Magazine), incorporated magicians and magic into the plots.

He was supervising editor of the various magazines and newspapers published by Barnarr Macfadden from 1921-41. He became editor of Liberty after Macfadden acquired it in 1931.

Oursler wrote a number of novels, including Sandalwood (1925), Stepchild of the Moon (1926) and The World's Delight (1929). He also wrote detective stories and magazine articles under the pseudonym Anthony Abbot, as well as several plays, the most famous of which was the gimmick-filled The Spider (1928), co-written with Lowell Brentano and later filmed twice, in 1931 and 1945. The great success of the play attracted four plagiarism suits, which were successfully defended by Oursler's private attorney, Arthur Garfield Hays.

In 1925, Oursler married Grace Perkins, who had been raised Catholic, but had left the Church in her teens. They practiced no religion and did not raise their children in any faith. Grace Perkins, a former actress, was a prodigious contributor to the Macfadden magazines. Several of her novels were made into films.

In 1935, the Oursler family toured the Middle East and spent a week in the Holy Land. On the journey home, Oursler started writing a book titled A Skeptic in the Holy Land. "I started out being very skeptical," he wrote later, "but in the last chapter I almost converted." He assumed that once the book was published, he would forget about religion, but perceiving the growing threat of Nazism and Communism, he found himself increasingly drawn to Christian ethics. Astounded at how little people knew about the life and teaching of Jesus Christ, he decided that he would write the story of Jesus and "try and make it as interesting as a serial story in a popular magazine". He would call it The Greatest Story Ever Told.

In 1943, Oursler was received into the Roman Catholic Church. The following year, his son was converted to the Catholic faith, and his wife returned to the faith the year after that. His daughter converted in 1948. The Greatest Story Ever Told was published in 1949. It was followed by The Greatest Book Ever Written in 1951, and The Greatest Faith Ever Known, completed by his daughter, April Oursler Armstrong, and posthumously published in 1953. The film, The Greatest Story Ever Told, based on Oursler's book, was released in 1965.

Oursler also wrote, as Abbot, the Reader's Digest article that was made into the movie Boomerang! (1947).

Another of his well-known books was Father Flanagan of Boy's Town, the story of Father Edward J. Flanagan's work with young men. The book was co-authored by Fulton's son Will Oursler, also a noted writer, and was later adapted into the movie Boys Town (1938), starring Spencer Tracy.

Fulton Oursler died in New York City in 1952, while halfway through writing his autobiography.