Theodore Shaw Wilson was born November 24, 1912, in Austin, Texas, to James Wilson, an English instructor, and Pearl Wilson, a librarian. The family moved to Tuskegee, Alabama, in 1918 when his father took a teaching post at Tuskegee Institute, and Wilson began piano lessons there at age six before adding violin, oboe, and clarinet; he also studied briefly at Talladega College. In 1929 he moved to Detroit with his brother, musician Gus Wilson, and began his professional career in Speed Webb's band. A year later he took over the piano chair in Milton Senior's band from Art Tatum, and touring brought him to Chicago, where he settled and worked through the early 1930s with Erskine Tate, clarinetist Jimmie Noone, and Louis Armstrong's orchestra (1931-1933), while also studying at close range under Earl Hines at the Grand Terrace Cafe. He relocated to New York in 1933 and joined Benny Carter's Chocolate Dandies.

Wilson's career changed permanently in the summer of 1935. Jamming with clarinetist Benny Goodman at a house party thrown by singer Mildred Bailey, he caught the attention of producer John Hammond, who arranged the sessions that became the Benny Goodman Trio, pairing Wilson and Goodman with drummer Gene Krupa; the group performed during intermissions at Goodman's dances and, when vibraphonist Lionel Hampton joined in 1936, expanded into the Benny Goodman Quartet. Wilson's presence in that integrated lineup made him one of the first Black musicians to perform prominently and regularly alongside white musicians before national audiences. That same year Hammond also secured Wilson a contract with Brunswick Records (1935-1939) to front his own studio band, billed as Teddy Wilson and His Orchestra, cutting hot swing arrangements of current pop tunes for the growing jukebox trade. The July 2, 1935, session gave singer Billie Holiday her recording debut, yielding "I Wished on the Moon," "What a Little Moonlight Can Do," "Miss Brown to You," and "A Sunbonnet Blue"; Wilson and Holiday went on to record roughly a dozen more sides together before the decade closed. The Brunswick series also featured Ella Fitzgerald, Lena Horne, Mildred Bailey, and Helen Ward as vocalists and drew on top swing-era sidemen including Lester Young, Roy Eldridge, Ben Webster, Buck Clayton, and Chu Berry; 38 of Wilson's sides are reported to have reached hit status. Among the later ones was a December 11, 1939, Columbia date, with drummer J.C. Heard in the band, that produced "Sweet Lorraine," backed with "Liza" on Columbia 35711. That specific recording is the one a teenage Toshiko Akiyoshi later credited with turning her toward jazz, playing it over and over in Japan until she had absorbed it by ear.

Wilson left Goodman's employ in 1939 to front his own fifteen-piece big band, but the venture folded within about a year for lack of a distinct musical identity. He regrouped as leader of a sextet that held a long residency at Cafe Society, New York's first racially integrated nightclub, from 1940 to 1944, presenting nightly "chamber jazz" sets with trumpeter Frankie Newton, clarinetist Ed Hall, and, again, Billie Holiday. Wilson's left-wing sympathies in these years, including benefit appearances for The New Masses and Russian War Relief and his chairmanship of an artists' committee backing a Communist Party candidate for New York City Council, earned him the nickname "the Marxist Mozart" and later drew FBI scrutiny. He rejoined the Benny Goodman Sextet in 1944, an on-and-off musical association with Goodman that continued into the early 1960s, and became a CBS radio staff musician.

From 1945 to 1952 Wilson taught piano at the Juilliard School while continuing to record and broadcast, then began touring extensively through Scandinavia, England, Scotland, Germany, Holland, and Switzerland. Signed to Norman Granz's Norgran and Verve labels through the mid-1950s, he cut a run of trio and small-group albums, among them The Creative Teddy Wilson (1955), and on consecutive days in January 1956 reunited with an ailing but still formidable Lester Young for two sessions: The Jazz Giants '56 (January 12, with Roy Eldridge, Vic Dickenson, Freddie Green, Gene Ramey, and Jo Jones) and Pres and Teddy (January 13, the same rhythm section minus Green), both now ranked among Young's finest late recordings. Wilson also appeared as himself in the 1955 film The Benny Goodman Story, and returned to Columbia at the decade's end for Mr. Wilson and Mr. Gershwin (1959) and companion songbook albums.

Wilson kept recording and touring steadily into his seventies, at times leading a trio that included his sons Theodore Wilson on bass and Steven Wilson on drums. In 1972 he paid tribute to his former singing partner on the solo piano album With Billie in Mind (Chiaroscuro), produced by Hank O'Neal with liner notes contributed by John Hammond himself. He served for a time as music director for The Dick Cavett Show and received an honorary doctorate of music from the Berklee College of Music in 1979; a 1982 Carnegie Hall reunion with Goodman ranked among his final major appearances with his old employer. Wilson passed away of stomach cancer on July 31, 1986, in New Britain, Connecticut, at age 73, and was inducted into the Big Band and Jazz Hall of Fame in 1993.

Wilson drew his harmonic and rhythmic vocabulary from Earl Hines's horn-like right hand and, especially, from Art Tatum's fleet arpeggios and full-keyboard sweep, but pared both down into something calmer: even, clean phrasing, a light touch, and diatonic, "inside" harmony in place of Tatum's chromatic density or the pounding two-handed attack of Harlem stride piano. Critic Scott Yanow called him "the definitive swing pianist," and AllMusic has described his playing as more accessible to a general audience than that of flashier contemporaries, a quality that suited both his years accompanying singers and his ease inside Benny Goodman's small groups. He held to that vocabulary even when sitting in with younger modernists, an early instance being a 1945 Red Norvo session ("Congo Blues") that placed him alongside Charlie Parker and Dizzy Gillespie without adopting their harmonic language. His touch shaped a generation of swing and mainstream pianists, among them Mary Lou Williams, Mel Powell, Billy Kyle, and Jess Stacy.