He was born Alfred Damon Runyan in Manhattan, Kansas, and grew up in Pueblo, Colorado, where Runyon Field and Runyon Lake are named after him. He was a third-generation newspaperman, and started in the trade under his father in Pueblo. He worked for various newspapers in the Rocky Mountain area; at one of those, the spelling of his last name was changed from "Runyan" to "Runyon", a change he let stand. After a notable failure in trying to organize a Colorado minor baseball league, Runyon moved to New York City in 1910. For the next ten years he covered the New York Giants and professional boxing for the New York American. In his first New York byline, the American editor dropped the "Alfred", and the name "Damon Runyon" appeared for the first time.
A heavy drinker as a young man, he seems to have quit the bottle soon after arriving in New York. He remained a heavy smoker.
Runyon frequently contributed sports poems to the American on boxing and baseball themes, and also wrote numerous short stories and essays. The musical Guys and Dolls and the play Little Miss Marker grew from his short stories. Gambling was a common theme of these works, and Runyon himself was a notorious gambler. A well-known saying of his paraphrases Ecclesiastes: "The race is not always to the swift, nor the battle to the strong, but that's the way to bet."
The Baseball Hall of Fame awarded Runyon the 1967 J.G. Taylor Spink Award for baseball journalism.
He is also a member of the International Boxing Hall Of Fame.
He died in New York City in 1946 and was interred in the Woodlawn Cemetery in The Bronx, New York.