Ray was born in Temvik, North Dakota; where his father, Charles; worked for the railroads. Ray's mother, Mabel, was asthmatic and developed a heart condition, and after the age of six Ray lived with his aunt. His father abandoned the family, and all efforts to locate him were to no avail.

Ray planned to become a surgeon, and after high school in Montana he entered a premed course at Whitworth College; Spokane, Washington. Financial difficulties forced him to drop out. He worked in Montana which included being a Brahma bull rider in rodeos. Ray went on to work in Chicago, Illinois; and Denver. He moved to Hawaii to work for Libby Pineapple when World War II broke out. He enlisted in the Navy there in 1943.

Ray met his wife Elaine in Great Falls, Montana, and at the close of the war they were married in Honolulu on October 22, 1945. Upon their return to the mainland in 1946, Ray began attending Dallas Theological Seminary, befriending Howard Hendricks, and graduating in 1950. The Stedmans went on to spend one additional summer in Pasadena at Emmanuel Baptist Church. Before his call to Palo Alto, Ray worked alongside J. Vernon McGee, a preacher widely known in Evangelical circles for his radio ministry. In the fall of 1950, Ray accepted the call to serve on the staff of Peninsula Bible Fellowship in Palo Alto, California.

Peninsula Bible Fellowship had begun two years earlier as a small Bible study. By 1950 it had grown to the point of needing pastoral care. The directors of Peninsula Bible Fellowship offered the position to Ray in 1950.

Peninsula Bible Fellowship became Peninsula Bible Church, and Ray's leadership here was to last forty years, culminating in his retirement as a pastor and elder on April 30, 1990. Ray's views on leadership diverged greatly from the common pastorate. Whereas most pastors rule with a firm and authoritative hand, Ray believed that consensus was key. Leadership at Peninsula Bible Church was and is derived by the Elders of the church. When they met to discuss the welfare of the church, decisions required unanimity for they believed "the mind of Christ was one."

Ray subjected his views to the collaborative opinion of 10-16 elders. This meant that a hairdresser who was an elder at PBC (Peninsula Bible Church) could disagree on plans Ray may have had for the church, and Pastor Stedman's opinion would be overruled. An occurrence which happened from time-to time.

Ray was known for his humor and warmth. His gentle personality allowed all those who met him to feel instantly at ease. He once remarked "I have several daughters, a wife and mother-in-law who all live in my house. I'm glad that I at least have a mailbox outside." Pastor Stedman's generosity of spirit was demonstrated through his pastoral intern program. Here, young men and women learned the principles of ministry as derived from the Bible. Christian leaders grew in their stewardship and those who served in ministry developed their leadership skills. Among his interns were Chuck Swindoll and Luis Palau.

At the height of his career, when he was speaking internationally; Ray often would return home to Palo Alto and listen to Peninsula Bible Church interns preach from the church pulpit. Regarding Ray's impact, Chuck Swindoll said "Ray Stedman is what I want to be when I grow up."