Chappelle was born in Washington, D.C. His father, William David Chappelle III, was a professor at Antioch College in Yellow Springs, Ohio. His younger brother is named Abdi. His mother, Yvonne K. (née Reed), was a professor at Howard University and the University of Maryland and is also a Unitarian Universalist minister. Chappelle grew up in Silver Spring, Maryland and attended Woodlin Elementary school. During young Chappelle's formative years, his comic inspiration came from various comedy idols, particularly Eddie Murphyand Richard Pryor. On Inside the Actors Studio, he also cited Bugs Bunny as one of his earliest influences, praising voice actor Mel Blanc.

Chappelle appeared as himself in an episode of The Larry Sanders Show, in which he and the executives of the show's nameless television network satirized the treatment that scriptwriters and show creators were subject to, as well as the executives' knee-jerk stereotyping when it came to race. In 1998, he played a supporting role as Tom Hanks' character's friend and confidant in You've Got Mail.

In 2003, Chappelle debuted his own weekly sketch comedy show on Comedy Central called Chappelle's Show. The show parodied many aspects of American culture including racial stereotypes, politics and pop culture. Along with comedy skits, the show also featured musical performances by mostly hip-hop and soul artists. Chappelle's pointed social and political commentary quickly helped the show garner critical and commercial success as well as controversy. Richard Pryor, one of Chappelle's comedic influences, was a fan of the show and stated that he had "passed the torch" to Chappelle. He received two Emmy nominations for the show.

In June 2004, based on the popularity of the "Rick James sketch", it was announced that Chappelle was in talks to portray Rick James in a biopic from Paramount Pictures. Chappelle disagreed with the proposed tone of the film and put a halt to the talks.

Chappelle has appeared in commercials for Right Guard, Coke, and Pepsi. The latter two are a contradictory endorsement which he has humorously referred to in a stand up performance, saying "I can't even taste the difference...all I know is Pepsi paid me most recently, so, it tastes better." Chappelle appeared on Talib Kweli/Hi-Tek collaboration album Reflection Eternal performing the voices of Nelson Mandela and Rick James. He also appeared on Prince Paul's album Politics of the Business and on mixtapes by Talib Kweli and 50 Cent.

Chappelle became a Muslim in 1998. He does not discuss this publicly, having stated that he does not want people associating his "flawed self" with Islam, which he says is "beautiful." Chappelle has commented on being a computer and video game enthusiast, some of his favorites being NBA Street, Street Fighter , Grand Theft Auto and World of Warcraft. He has paid tribute to various video games in a few of his sketches. One was to Grand Theft Auto, in which he plays the main character, who steals a car to go to work. Another is when he is playing "Street Hoops" with a kid who has cancer in the hospital. In a sketch about a posthumous Tupac Shakur song, a lyric mentions "run up in yo' spot like CJ from San Andreas."