Dunham was born in Dallas, Texas in 1962, and raised in an affluent neighborhood as the only adopted son of a real estate appraiser and a homemaker. He began ventriloquism at age eight, when his parents gave him a Mortimer Snerd dummy for Christmas, and he borrowed a how-to book on ventriloquism from the library the next day. Dunham began practicing for hours in front of a mirror, studying the routines of Edgar Bergen, and the how-to record Jimmy Nelson's Instant Ventriloquism, finding ventriloquism to be a learned skill, similar to juggling, that anyone with a normal speaking voice can acquire.

When Dunham was in the sixth grade, he began attending the Vent Haven ConVENTion in Fort Mitchell, Kentucky, an annual international meeting of ventriloquists that includes competitions, where he met Jimmy Nelson in person. Dunham has missed only one ConVENTion since then, in 1977. The organizers of the ConVENTion eventually declared Dunham a "retired champion", ineligible from entering any more competitions, as other attendees were too intimidated to compete against him. The Vent Haven Museum devotes a section to Dunham, alongside Señor Wences and his idol, Edgar Bergen.

Dunham began performing for audiences as a teenager, in various venues such as school, church, and during his job at Six Flags. By his middle school years, he began to perform for banquets attended by local celebrities such as Dallas Cowboys quarterback Roger Staubach, having developed his style of lampooning those he performed for, using the puppets to say things too risque for him to say without them.

Dunham's earliest television exposure was doing commercials for Datsun dealerships while in high school. During this period he became so associated with his craft that he and one of his dummies "cowrote" a column in the school paper, and he would pose with his dummies for yearbooks. In college, he flew around the country on weekends to perform private shows for customers such as General Electric, whose CEO, Jack Welch, he mocked during his routine. After graduating from Baylor University in Waco, Texas in 1986, he moved to Los Angeles, California, never having, as he has commented, "a real job."

Dunham appeared in the Broadway show Sugar Babies with Mickey Rooney and Ann Miller in 1985, and at the Westbury Music Fair on Long Island. These early experiences, in which he used characters like José Jalapeño on a Stick, taught him the value of modifying his act regionally, as the jalapeño jokes that worked well in Texas were not as well received by audiences in Long Island.

Dunham made his debut on The Tonight Show with Johnny Carson in 1990. At the end of his act, he was invited to sit on Johnny Carson’s couch, considered a mark of approval. At the time, Dunham saw this as his big break, though he would toil in obscurity for another twelve years, continuing his stand up at venues such as The Improv chain, and appearing in small roles on TV. One of these was such as a 1996 episode of Ellen, in which he appeared with the character of Walter, whom he had begun using around this time. Dunham also appeared with Walter in a TV commercial for Hertz. His other appearances include 60 Minutes II, Fox Sports Net's The Best Damn Sports Show Period, Hollywood Squares, Entertainment Tonight, Good Morning America and the WB's Blue Collar TV.

On July 18, 2003, Dunham appeared on Comedy Central Presents, his first solo appearance on Comedy Central. During his half hour piece, he showcased José Jalapeño on a Stick, Walter, an early version of Melvin the Superhero Guy and Peanut, whom Dunham had begun to merchandise into a line of dolls. The appearance was successful, but Comedy Central resisted giving Dunham more airtime, feeling that he was not a good fit for them. Dunham’s manager, Judi Brown-Marmel, lobbied the network, pointing to Dunham's drawing power and merchandising profits, and arguing that the network needed more diverse content. Surprised by the high ratings of the first Blue Collar Comics concert movie that same year, the network began to reconsider its brand. In 2006, it gave Dunham his first one hour special, Arguing with Myself, which was taped in Santa Ana, California, and drew two million viewers when it aired, cementing Dunham's stardom. His second special, Spark of Insanity, was taped at the Warner Theater in Washington, D.C. in 2007. It was available at Redbox stands and on DVD in September 2007. Jeff Dunham's Very Special Christmas Special was taped at the Pabst Theater in Milwaukee, Wisconsin in 2008, and premiered on Comedy Central on November 16, 2008, watched by 6.6 million people. It became available on DVD and Blu-ray on November 18, 2008. The special's premiere was the highest rated telecast in Comedy Central's history.

Dunham appeared as "The Amazing Ken" with José Jalapeño on a Stick in the 2007 Larry the Cable Guy movie Delta Farce.

In addition to his comedy specials, Dunham also released his first music album, Don't Come Home for Christmas, on November 4, 2008. It contains original Christmas songs as well as a parody of "Jingle Bells" by Achmed entitled "Jingle Bombs". All the songs, with the exception of "Jingle Bombs", were written and accompanied by Brian Haner, who has joined Dunham's act as "Guitar Guy". His first onscreen appearance was in Jeff Dunham's Very Special Christmas Special.

In March 2009, Dunham signed a multi-platform deal with Comedy Central. It included a fourth stand-up special to air in 2010, DVDs, a consumer products partnership, a 60-city tour beginning in September 2010, and an order for a television series called The Jeff Dunham Show that premiered on October 22, 2009. Despite having the most-watched premiere in Comedy Central history, and higher average ratings than other shows on that network, the show was canceled after only one season, amid poor reviews and higher production costs than other Comedy Central shows.

Dunham appeared in a guest role with Bubba J on NBC's sictom 30 Rock, playing a ventriloquist named Rick Wayne and his dummy Pumpkin from Stone Mountain, Georgia. In November 2009 Dunham also appeared with Walter in "Hart to Hart", an episode of the Disney Channel series Sonny With a Chance, as two security guards.

Dunham appeared in the 2010 Steve Carell/Paul Rudd comedy, Dinner for Schmucks, as Lewis, with a new puppet named Debbie.

Critical praise and controversy

In January 2008, Dunham was voted by fans the Top Comic in Comedy Central's “Stand-Up Showdown.” He is the only person ever to win the "Ventriloquist of the Year" Award twice, was nominated "Comedian of the Year" by the TNN Music City News Country Awards, and has drawn praise from the Dallas Morning News for his technique and timing.

Some have accused Dunham's characters of being racist caricatures, sexist, and homophobic. In 2008, a TV commercial for a ringtone featuring Dunham's character Achmed the Dead Terrorist (see Characters below) was banned by the South African Advertising Standards Authority after a complaint was filed by a citizen stating that the ad was offensive to Muslims, and portrayed all Muslims as terrorists. Dunham responded that "Achmed makes it clear in my act that he is not Muslim." However, the Advertising Standards Authority noted that the name Achmed was of Arab origin and was one of the names of Muhammad. Dunham responded, "I've skewered whites, blacks, Hispanics, Christians, Jews, Muslims, gays, straights, rednecks, addicts, the elderly, and my wife. As a standup comic, it is my job to make the majority of people laugh, and I believe that comedy is the last true form of free speech." He further commented, "I'm considering renaming Achmed, 'Bill.'" (Dunham has conceded that he does exhibit particular sensitivity to the "conservative country crowd," or those characterized by "basic Christian values," as they are one of his largest constituencies, and part of his upbringing.) The Islamic Human Rights Commission recognized Dunham in 2009 for his "outstanding Islamophobia."

Dunham was heckled and criticized for mocking TV critics during a July 2009 press tour to promote his then-upcoming Comedy Central TV series, as well as Comedy Central programming chief Lauren Correo. In October 2009 the series, The Jeff Dunham Show, enjoyed good initial ratings, but was not well-liked by critics, who did not find it funny, and either questioned the wisdom of translating his act into a series, or conceded a prejudice against Dunham, his previous specials, or ventriloquism itself.

J.P. Williams, the producer of the Blue Collar Comedy Tour, has opined that Dunham's act is not funny on its own merits, and that his material gets a greater reaction because of the puppet characters that it would otherwise not garner by itself.

In 2003, BRASMA Publications released Dear Walter, a collection of questions asked of Dunham's fictional curmudgeon at live performances, authored by Dunham, and Walter Cummings.

According to Dunham's website, his autobiography, All By My Selves: Walter, Peanut, Achmed and Me, will be published by Dutton in 2010.

Walter

Walter is a retired, grumpy old man with arms always crossed in discontent. He has a brash, negative and often sarcastic view on today's world. He is a Vietnam War veteran and a former welder, and "doesn't give a damn" about anyone, especially his own wife and certain audience members. Walter has appeared in all three Comedy Central specials. He's been married for several decades, and when Dunham asks him if he remembers the happiest moment of his life after Walter tells him he has been married for forty-six years, Walter responds, "Forty-seven years ago!" Dunham created the Walter puppet himself, including both the initial sculpture and the silicon mold, though he eventually began using professional effects companies for the latter stages with his subsequent puppets.

Peanut

Peanut is a hyperactive, purple-skinned "woozle" with white fur covering most of his body, a tuft of green hair on the top of his head, and one red sneaker on his left foot. Dunham explains in Arguing with Myself that Peanut is from a small Micronesian island, and that they met in Florida. Peanut's humor is not based on a particular motif or stereotype, as those of the other characters, and has been described as "the bad kid". He often makes fun of Dunham, and torments and mocks José Jalapeño on a Stick. Touching upon his unusual appearance and personality, he asks Dunham in Arguing with Myself, after Dunham denies ever having done drugs, "Then how the hell did you come up with me?"

José Jalapeño on a Stick

José is a talking jalapeño pepper on a stick who wears a small sombrero. José, who speaks with a thick Latin accent, is typically paired with Peanut, who often makes fun of José, uses appeals to Latino stereotypes when doing so, and makes fun of his being on a stick. Although José was not Dunham's first puppet, it was the first that Dunham made himself.

Bubba J

Bubba J is a beer-drinking redneck that Dunham describes in Arguing with Myself and A Very Special Christmas Special as "white trash trailer park", and whom Dunham uses for humor centered on such stereotypes. To this end, he frequently does jokes involving Bubba J's love of drinking beer and NASCAR, and his low intelligence. Touching upon such stereotypes, Bubba mentions in Arguing with Myself that he met his wife at a family reunion, and remembers seeing her with a corn dog in one hand, a beer in another, and leaning against a ferris wheel, "making it tilt".

Sweet Daddy Dee

Dunham introduces Sweet Daddy Dee in Arguing with Myself as his "new manager". He calls himself a "pimp", which he says stands for "Player In the Management Profession." According to Sweet Daddy, because he is a pimp, that makes Jeff the " ho". When Dunham objects, Daddy Dee points out that Dunham makes people laugh and feel good for a living. When Dunham agrees that this is the case, Daddy Dee says, "You a ho." When Dunham asks what he would say if he told him that he was a comedian only because he enjoyed it, Daddy Dee responds, "You a dumb ho."

Melvin the Superhero Guy

Also referred to in Spark of Insanity as The Superhero: Melvin, Melvin wears a blue superhero costume, and is used to poke fun at superheroes. When asked about his superhuman powers, he indicates that he has X-ray vision, adding, "I love looking at boobies!" He appears to have no other powers, however: When Dunham asks how far he can fly, he responds, "How far can you throw me?", and when asked if he can stop a bullet like Superman, he responds, "Yeah. Once." Dunham portrays Melvin as unimpressed with other superheroes: When told Superman can leap tall buildings in a single bound, Melvin dismisses him as a "showoff," arguing that he can simply walk around them, observes that Aquaman has the same powers as Spongebob Squarepants, that the Flash's super speed is derived from methamphetamine, that the Hulk's vaunted ability to get stronger as he gets angrier merely mirrors "every white trash guy on COPS," and makes innuendo about the questionable relationship between Batman and the underage Robin. Melvin's first onscreen appearance was in the July 2003 Comedy Central Presents episode, in which he had small, black, beady eyes. By his next appearance, in Spark of Insanity, he had been modified to have large, blue, crossed eyes. He also has an enormous nose, which he claims is his symbol. Dunham sculpted the current version of Melvin's head himself, and hired an effects company called Renegade Effects Groups to create the rubber mold and complete the puppet, before then installing the mechanics himself.

Achmed the Dead Terrorist

Achmed is the skeletal corpse of an incompetent suicide bomber. He is used by Dunham to satirize the contemporary issue of terrorism. He is known for yelling, "Silence! I kill you!" to Dunham and people in the audience who laugh at him (or laugh with him, as he rarely makes the distinction). Achmed first appeared in Spark of Insanity, and later made an appearance in the Very Special Christmas Special, singing a song called "Jingle Bombs". Most of the humor Dunham expresses with Achmed centers on this motif. When mentioning that Achmed appears to be dead because he's a skeleton, Achmed responds, "It's a flesh wound." When Dunham inquires as to how he died, Achmed explains his incompetence with explosives, while also casting aspersions on Dunham's sexual prowess, by saying that they both suffer from "premature detonation." Although he frequently mentions working for Osama Bin Laden, Achmed claims he doesn't think he's a Muslim ("look at my ass! It says 'Made in China'"). As of June 2009, the sketch in which Dunham introduced Achmed is the fourth most watched online video ever, having amassed nearly 200 million views.

Diane

Diane first appeared with Dunham in the 2010 film Dinner for Schmucks as "Debbie", his character's "wife". She will make her stand-up debut in Dunham's Identity Crisis Tour 2010.

Others

Other characters that Dunham has voiced include a miniature puppet of Peanut's, which turns out to be a small version of Dunham himself, and an unseen worm inside a bottle of tequila, both of which he has used, for example, in his appearance on A&E's An Evening at The Improv.

In addition to building the dummies he uses in his act, Dunham also restores antique ones as a hobby, such as The Umpire, a mechanized dummy built in 1941 to work the plate at a girl's softball game, but which went unused and packed away for 50 years, before Dunham acquired it in early 2008.

Dunham, who says he has loved helicopters since childhood, is fond of building and flying his own kit helicopters from Rotorway helicopter kits, as depicted in his appearance on the CMT television magazine Fast Living.

In November 2008 Dunham separated from his wife of 14 years, Paige, with whom he has three daughters, Bree, Ashlyn and Kenna.