Few details of Heywood's life have been documented with certainty. Most references indicate that the county of his birth was most likely Lincolnshire, while the year has been variously given as 1570, 1573, 1574 and 1575. It has been speculated that his father was a country parson and that he was related to the half-century-earlier dramatist John Heywood, whose death year is, again, uncertain, but indicated as having occurred not earlier than 1575 and not later than 1589.

Heywood is said to have been educated at the University of Cambridge, eventually becoming a fellow of Peterhouse. Subsequently, however, he moved to London, where the first mention of his dramatic career is a note in the diary of theatre entrepreneur Philip Henslowe recording that he wrote a play for the Admiral's Men, an acting company, in October 1596. By 1598, he was regularly engaged as a player in the company; since no wages are mentioned, he was presumably a sharer in the company, as was normal for important company members. He was later a member of other companies, including Lord Southampton's, Lord Strange's Men and Worcester's Men (who subsequently became known as Queen Anne's Men). During this time, Heywood was extremely prolific; in his preface to The English Traveller (1633) he describes himself as having had "an entire hand or at least a maine finger in two hundred and twenty plays". However, only twenty three plays and eight masques have survived that are accepted by historians as wholly or partially authored by him.

Heywood's first play may have been The Four Prentises of London (printed 1615, but acted some fifteen years earlier). This tale of four apprentices who become knights and travel to Jerusalem may have been intended as a burlesque of the old romance, but it is more likely that it was meant seriously to attract the apprentice spectators to whom it was dedicated. Its popularity was satirized in Beaumont and Fletcher's travesty of the middle-class taste in drama, The Knight of the Burning Pestle. Heywood's two-part history plays Edward IV (printed 1600), and If You Know Not Me, You Know Nobody, or, The Troubles of Queene Elizabeth (1605 and 1606) concern, respectively, The Wars of the Roses and the life of the Queen contrasted with that of the preeminent merchant and financier Thomas Gresham.

He wrote for the stage, and (perhaps disingenuously) protested against the printing of his works, saying he had no time to revise them. Johann Ludwig Tieck called him the "model of a light and rare talent", and Charles Lamb wrote that he was a "prose Shakespeare"; Professor Ward, one of Heywood's most sympathetic editors, pointed out that Heywood had a keen eye for dramatic situations and great constructive skill, but his powers of characterization were not on a par with his stagecraft. He delighted in what he called "merry accidents", that is, in coarse, broad farce; his fancy and invention were inexhaustible.

Heywood's best known plays are his domestic tragedies and comedies (plays set among the English middle classes); his masterpiece is generally considered to be A Woman Killed with Kindness (acted 1603; printed 1607), a domestic tragedy about an adulterous wife, and a widely admired Plautine farce The English Traveller (acted approximately 1627; printed 15 July 1633), which is also known for its informative "Preface", giving Heywood an opportunity to inform the reader about his prolific creative output. His citizen comedies are noteworthy because of their physicality and energy. They provide a psycho-geography of the sights, smells, and sounds of London's wharfs, markets, shops, and streets which contrasts with the more conventional generalisations about the sites of commerce, which are satirised in city comedies.

Heywood wrote numerous prose works, mostly pamphlets about contemporary subjects, of interest now primarily to historians studying the period. His best known long essay is An Apology for Actors, a moderately-toned and reasonable reply to Puritan attacks on the stage, which contains a wealth of detailed information on the actors and acting conditions of Heywood's day. It is in the "Epistle to the Printer" in this 1612 work that Heywood writes about William Jaggard's appropriation of two of Heywood's poems for the same year's edition of The Passionate Pilgrim.

Between 1619 and 1624, Heywood seems to have inexplicably ceased all activity as an actor, but from 1624, until his death seventeen years later, his name frequently appears in contemporary accounts. In this period, Heywood was associated with Christopher Beeston's company at The Phoenix theatre, Queen Henrietta's Men or Lady Elizabeth's Men. At The Phoenix, Heywood produced new plays such as "The Captives", "The English Traveller", and "A Maidenhead Well Lost" as well as revivals of old plays. Numerous volumes of his prose and poetry were published, including two lengthy poetic works, Gunaikeion (1624), described as "nine books of various history concerning women" and, eleven years later, "The Hierarchy of the Blessed Angels". As a measure of Heywood's popular standing in the final years of his life, Love's Mistress or the Queen's Masque, a play published in 1636, but performed since 1634, was reported to have been seen by King Charles I and his queen three times in eight days.

According to writings of the period, Thomas Heywood had been living in Clerkenwell since 1623 and it was there, at St. James's Church that he was buried eighteen years later. Because of the uncertainty regarding the year of his birth, his age can only be estimated, but he was likely in his late sixties, possibly having reached seventy. The date of the burial, 16 August 1641, the only documented date, also appears in a number of reference books as Heywood's death date, although he may actually have died days earlier. It may be presumed, however, that due to a possible August heatwave, the burial occurred on an expedited basis.

Primary literary output

• The Royall King and the Loyall Subject (acted circa 1600; printed 1637)
• the two parts of The Fair Maid of the West or a Girle Worth Gold (both parts printed 1631)
• The Fayre Maid of the Exchange (printed anonymously 1607), a play doubtfully attributed to Heywood
• The Late Lancashire Witches (1634), written with Richard Brome and prompted by an actual trial in the preceding year
• A Mayden-Head Well Lost (1634)
• A Challenge for Beautie (1636)
• The Wise-Woman of Hogsdon (printed 1638), the witchcraft in this case being matter for comedy, not seriously treated as in the Lancashire play
• Fortune by Land and Sea (printed 1655), with William Rowley
• The five plays called respectively The Golden Age, The Silver Age, The Brazen Age and The Iron Age (the last in two parts), dated 1611, 1613, 1613 and 1632, are series of classical stories strung together with no particular connection except that "old Homer" introduces the performers of each act in turn
• Loves Maistresse or The Queens Masque (printed 1636), the story of Cupid and Psyche as told by Apuleius
• The Tragedy of the Rape of Lucrece (1608), which chronicles the rise and fall of Tarquin as presented by a "merry lord", Valerius, who lightens the gloom of the situation by singing comic songs
• A series of pageants, most of them devised for the City of London, or its guilds, by Heywood, printed in 1637
• In volume iv of his Collection of Old English Plays (1885), A. H. Bullen printed for the first time a comedy by Heywood, The Captives, or The Lost Recovered (licensed 1624), and in volume ii of the same series, Dicke of Devonshire, which he tentatively assigns to the same hand
• Troia Britannica, or Great Britain's Troy (1609), a poem in seventeen cantos "intermixed with many pleasant poetical tales" and "concluding with an universal chronicle from the creation until the present time"
• An Apology for Actors, Containing Three Brief Treatises (1612), edited for the Shakespeare Society in 1841
• Gynaikeion or Nine Books of Various History Concerning Women (1624)
• England's Elizabeth, Her Life and Troubles During Her Minority from Time Cradle to the Crown (1631)
• The Hierarchy of the Blessed Angels (1635), a didactic poem in nine books;
• A Woman Killed with Kindness
• Pleasant Dialogue, and Dramas Selected Out of Lucian, etc. (1637)
• The Life of Merlin surnamed Ambrosius (1641)