His father, who was a celebrated carver of figureheads for ships, destined him for a commercial life, but even at school the boy showed his natural taste and talents by producing numerous wax models and busts of his schoolfellows, and afterwards, when placed in a mercantile house, still carried on his favourite employment. Two Homeric studies, executed for a friend, were shown to J. Flaxman, who bestowed on them such high commendation that in 1807 Baily came to London and placed himself as a pupil under the great sculptor. In 1809 he entered the academy schools.
In 1811 he gained the academy gold medal for a model of Hercules restoring Alcestis to Admetus, and soon after exhibited Apollo discharging his Arrows against the Greeks and Hercules casting Lichas into the Sea. In 1821 he was elected R.A., and exhibited one of his best pieces, Eve at the Fountain. He was entrusted with the carving of the bas-reliefs on the south side of the Marble Arch in Hyde Park, and executed numerous busts and statues, such as those of Nelson in Trafalgar Square, of Earl Grey, of Lord Mansfield and others.
Edward Hodges Baily died in Holloway and was buried in London's Highgate Cemetery.