He was born in New York City into a wealthy family (his father owned the Bristol Hotel), which is why he grew up as part of the highest social circles. Woolley received his bachelor's degree from Yale University, where Cole Porter was a classmate and close friend, and his master's degree from the same university and from Harvard University. He eventually became an assistant professor of English and dramatic studies at Yale University, having Thornton Wilder and Stephen Vincent Benét among his students.
In another area, with the beginning of World War I Woolley served in the United States Army as a lieutenant, being assigned to the General Staff in Paris.
Woolley began directing theater on the Broadway circuit in 1929 and began as an actor in 1936, after leaving his academic life. In 1939 he appeared in the George S. Kaufman and Moss Hart comedy The Man Who Came to Dinner, making a total of 783 performances. It was for this role, well received by critics, that he was typecast in roles of sharp-tongued, sophisticated and arrogant characters.
Like Clifton Webb, Woolley signed a contract with 20th Century Fox in the 1940s and appeared in numerous films until the mid-1950s. His most famous film role was his first on Broadway, in the version filmed in 1942 from The Man Who Came to Dinner, a caricature by legendary theater critic Alexander Woollcott. The film received good reviews from The New York Times.
In 1946 Woolley played himself in the 1946 Warner Bros. biography of Cole Porter, Night and Day (1946).
Woolley also worked frequently on radio as a guest artist, starting in the medium as a counterpart to Al Jolson. Woolley became a household name appearing on shows such as The Fred Allen Show, Duffy's Tavern, The Big Show, The Chase and Sanborn Hour, with Edgar Bergen and his doll Charlie McCarthy, and others.
In 1950 Woolley landed the starring role in the NBC series The Magnificent Montague. His role was that of an old Shakespearean actor who is forced to swallow his pride and work at a radio station, becoming an unlikely star while also having to battle with his wife, Lily (Anne Seymour), and with the wisecracking maid Agnes (Pert Kelton). The show was aired between November 1950 and September 1951.
At first Woolley acted on television making cameos, until he finally had his own drama series, On Stage with Monty Woolley. He also appeared in a 1954 CBS television adaptation of the play The Man Who Came to Dinner, which some critics criticized, in addition to working on other televised dramas within the Best of Broadway series.
After finishing his last film, Kismet (1955), Woolley returned to radio, where he worked for about a year, after which he was forced to retire as a result of his poor health.
Woolley was nominated twice for an Oscar, once for the Oscar for Best Actor in 1943 for The Pied Piper, and once for the Oscar for Best Supporting Actor in 1945 for Since You Went Away. In 1942 he won the Best Actor Award from the National Board of Review for his role in The Pied Piper.
Woolley was awarded a star on the Hollywood Walk of Fame, officially for his film work, although his star bears the television emblem.
Monty Woolley, affectionately known as "The Beard," died of kidney and heart ailments on May 6, 1963 in Albany, New York, at the age of 74. He was buried at Greenridge Cemetery in Saratoga Springs ( NY).