Born in Leigh, James Hilton was the son of John Hilton, the headmaster of Chapel End School in Walthamstow. His father was one of the inspirations for the character of Mr. Chipping in Goodbye, Mr. Chips. (Hilton was born in Wilkinson Street, Leigh ... there is a teacher in Goodbye, Mr. Chips called Mr Wilkinson.) The setting for Goodbye, Mr. Chips is believed to have been based on the Leys School, Cambridge, where James Hilton was a pupil. Chipping is also likely to have been based on W. H. Balgarnie, one of the masters of the school who was in charge of the Leys Fortnightly, where Hilton's first short stories and essays were published.

Hilton wrote his two most remembered books, Lost Horizon and Goodbye, Mr Chips while living in a rather ordinary semi-detached house on Oak Hill Gardens, Woodford Green. The house still stands, with a blue plaque marking Hilton's residence.

He was married twice, first to Alice Brown and later to Galina Kopineck. Both marriages ended in divorce. He died in Long Beach, California from liver cancer.

Hilton found literary success at an early age. His first novel, Catherine Herself, was published in 1920, when he was 20. Several of his books were international bestsellers and inspired successful film adaptations, notably Lost Horizon (1933), which won a Hawthornden Prize; Goodbye, Mr. Chips (1934); and Random Harvest (1941). Lost Horizon, which sold briskly in the 1930s as one of the first Pocket Books (it in fact bore the serial number "1"), is sometimes referred to as the book that began the paperback revolution.

Hilton is said to have been inspired to write Lost Horizon, and to invent "Shangri-La" by reading the National Geographic Magazine articles of Joseph Rock, an Austrian-American botanist and ethnologist exploring the southwestern Chinese provinces and Tibetan borderlands. Still living in Britain at the time, he was perhaps influenced by the Tibetan travel articles of early travellers in Tibet whose writings were found in the British Library. The Danish father of the mathematician Sir Christopher Zeeman, Christian Zeeman, has also been claimed to be the model for the hero of the story. He disappeared while living in Japan (where Christopher Zeeman was born in 1925), and was reputed to be living incognito in a Zen Buddhist monastery.

Some say that the isolated valley town of Weaverville, California, in far northern Trinity County, was a source, but this is the result of a misinterpretation of a comment by Hilton in a 1941 interview, in which he said that Weaverville reminded him of Shangri-La. Coincidentally, Junction City (about 8 miles from Weaverville) now has a Tibetan Buddhist centre with the occasional Tibetan monks in saffron robes. The name has become a byword for a mythical utopia, a permanently happy land, isolated from the world. After the Doolittle Raid on Tokyo, when the fact that the bombers had flown from an aircraft carrier remained highly classified, US President Franklin D. Roosevelt told the press facetiously that they had taken off from Shangri-La. The Navy subsequently gave that name to an aircraft carrier, and Roosevelt named his Maryland presidential retreat "Shangri-La". (Later, President Dwight D. Eisenhower renamed the retreat Camp David after his grandson, the name by which it is known today.) Zhongdian, a mountain region of Southwest China, has now been renamed Shangri-La (Xianggelila), based on its claim to have inspired Hilton's book

Hilton, who lived and worked in Hollywood beginning in the mid-1930s, won an Academy Award in 1942 for his work on the screenplay of Mrs. Miniver, based on the novel by Jan Struther. He hosted The Hallmark Playhouse (1948—1953) for CBS Radio. One of his later novels, Morning Journey, was about the movie business.

• Catherine Herself, 1920
• Storm Passage, 1922
• The Passionate Year, 1924
• Dawn Of Reckoning (Rage In Heaven), 1925
• Meadows Of The Moon, 1926
• Terry, 1927
• The Silver Flame (Three Loves Had Margaret), 1928
• Murder at School (U.S. title: Was It Murder?), published under the pen-name Glen Trevor, 1931
• And Now Goodbye, 1931
• Contango (Ill Wind), 1932
• Knight Without Armour (Without Armor), 1933
• Lost Horizon, 1933
• Goodbye, Mr. Chips, 1934
• We Are Not Alone, 1937
• To You, Mr Chips, 1938
• Random Harvest, 1941
• The Story Of Dr. Wassell, 1944
• So Well Remembered, 1945
• Nothing So Strange, 1947
• Twilight Of The Wise, 1949
• Morning Journey, 1951
• Time And Time Again, 1953

Hilton's books are sometimes dismissed as sentimental celebrations of English virtues. This is true of Mr. Chips, but some of his novels had a darker side. Flaws in the English society of his time ... particularly narrow-mindedness and class-consciousness ... were frequently his targets. His novel We Are Not Alone, despite its inspirational-sounding title, is a grim story of legally approved lynching brought on by wartime hysteria in Britain.

Some of Hilton's novels were filmed:

• Lost Horizon (1937, 1973)
• Knight Without Armour (1937)
• We Are Not Alone (1939) with a screenplay by Hilton
• Goodbye, Mr. Chips (1939, 1969, 1984, 2002)
• Random Harvest (1942), reprised on radio in 1943
• So Well Remembered (1947) starring John Mills and narrated by Hilton

Hilton co-wrote the book and lyrics for Shangri-La, a disastrous 1956 Broadway musical adaptation of Lost Horizon.

There are two sequels to Lost Horizon: Messenger by Frank DeMarco and Shangri-La by Eleanor Cooney and Daniel Altieri. Neither achieved any lasting fame.

A furore was caused in the late 1990s, when Wigan Council (the Metropolitan Borough responsible for Leigh) announced that a blue plaque in honour of Hilton would be placed not on his house in Wilkinson Street, but on the town hall. This caused great debate amongst the populace of Leigh, which considered it more appropriate to have it on the house itself, which is only a few hundred yards from the town hall.

James Hilton should not be confused with the Leigh businessman of the same name who became chairman of Leigh Rugby League Football Club after the War and after whom the club's former ground, Hilton Park, was named.