Bailey was born in Bath and he spent most of his childhood in Keynsham. His father was a medical practitioner and his mother a hospital ward sister. His maternal grandparents lived in an annexe, built on the side of the house by his maternal grandfather who was a stonemason and builder. He was educated at King Edwards School in Bath, where he was initially a highly academic pupil winning most of the prizes. At about the age of 15, he started to become distracted from school work when he realised the thrill of performance as a member of a school band called Behind Closed Doors, which played mostly original work. He is a classically trained musician and was the only pupil at his school to study A Level music, which he passed with an A grade. He also states he was good at sport (captain of KES 2nd XI cricket team 1982), which often surprised his teachers. He would often combine music and sport by leading the singing on the long coach trip back from away rugby fixtures. It was here that he was given his nickname Bill by his music teacher, Lynda Phipps, for being able to play the song “Won’t You Come Home Bill Bailey” so well on the guitar.
Bailey began touring the country with comedians such as Mark Lamarr. In 1984, he formed a double act, the Rubber Bishops, with Toby Longworth. It was there that Bailey began developing his own style, mixing in musical parodies with deconstructions of or variations on traditional jokes (“How many amoebas does it take to change a lightbulb? One, no two! No four! No eight…”). According to comedy folklore, after a reviewer once criticised his act for its lack of jokes, Bailey returned the following night, at Queen Margaret College, Edinburgh, to perform a set composed entirely of punchlines. Longworth left to join the RSC in 1989 and was replaced by Martin Stubbs.
He went solo the next year with the one man show Bill Bailey’s Cosmic Jam. The show led to a recording at the Bloomsbury Theatre in London which was broadcast in 1997 on Channel 4 as a one-hour special called Bill Bailey Live. It was not until 2005 that this was released on DVD uncut and under its original title. It marked the first time that Bailey had been able to tie together his music and post-modern gags with the whimsical rambling style for which he is now known.
Over the next few years, Bailey made guest appearances on shows such as Have I Got News For You, World Cup Comedy, Room 101 and three episodes of off-beat Channel 4 sitcom Spaced, in which he played comic-shop manager Bilbo Bagshot. In 1998, Dylan Moran approached him with the pilot script forBlack Books, a Channel 4 sitcom about a cold-hearted bookshop owner, his nice-guy assistant, and their socially awkward female friend. It was commissioned in 2000, and Bailey took the part of the assistant Manny Bianco, with Moran playing the owner Bernard and Tamsin Grieg the friend, Fran. Three series of six episodes each were made.
When Sean Hughes left his long-term role as a team captain on Never Mind the Buzzcocks in 2002, Bailey became his successor. Host Mark Lamarr continually teased him about his looks and his pre-occupation with woodland animals. Bailey has appeared frequently on the intellectual panel game QI since it began in 2003, alongside host Stephen Fry and regular panellist Alan Davies; he was also the winner of the show’s unaired pilot episode. Other television appearances include a cameo role in Alan Davies’ drama series Jonathan Creek as failing street magician Kenny Starkiss. Bill Bailey played Droxil, a Harvest Ranger from the Planet Androzani Major, in the 2011 Christmas Special of Doctor Who.