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Blunt was born at a military hospital in Tidworth, Wiltshire, England, the first child born to Jane and Charles Blount. He spent his early childhood living in England, Cyprus, and Germany. His father instilled in his son a love of flying, and Blunt earned his pilot's licence at age 16. The Blount family has a long history of military service, dating to the 10th century.

At age seven, Blunt was enrolled at Elstree School, Woolhampton, and then attended Harrow School (Elmfield House) on an army bursary. From Harrow School he gained an army-sponsored place at the University of Bristol, where he first studied Aerospace Manufacturing Engineering and then subsequently read Sociology. He graduated with a BSc(Hons) in Sociology in 1996.

As the British Army sponsored his university education, Blunt was obliged to serve a minimum of four years in the armed forces. Blunt trained at the Royal Military Academy Sandhurst. He was commissioned as a subaltern (Second Lieutenant) in the Life Guards, a unit of the Household Cavalry, where he rose to the rank of Captain. In 1999, he served as an armoured reconnaissance officer in the NATO deployment in Kosovo. It was while on duty there that he wrote the song "No Bravery".

Blunt took piano and violin lessons as a child, but his first significant exposure to popular music was at Harrow School. There, he was introduced to the guitar by a fellow student, and started playing guitar and writing songs at age 14. At Bristol University, his graduate thesis was The Commodification of Image - Production of a Pop Idol.

Blunt left the British Army in 2002 so that he could pursue his musical career. It was at about that time that he started using the stage name "Blunt", in part to make it easier for others to spell; "Blount" is pronounced the same way, and remains his legal surname. Shortly after leaving the Army, he was signed to EMI music publishers, and to Twenty-First Artists management.

Blunt recorded Back to Bedlam in 2003 with producer Tom Rothrock at Rothrock's home studio, using session musicians and performing on many different instruments himself. Back to Bedlam was finally released in the UK in October 2004. The debut album from the unknown Blunt attracted little critical attention, and there were no published reviews from major UK music journals. His live performances, mainly in support of better known musicians, received somewhat mixed but generally favourable reviews.

James Blunt's debut single in the UK was "High". This song peaked below the Top 100 of the UK Singles Chart. However, the song was chosen to appear in a Vodafone commercial in Italy, and was a Top 10 hit in that country. In March 2005, his second single, "Wisemen," was released.

Blunt's third single "You're Beautiful" was his breakout hit. The song debuted at number 12 in the UK, and rose all the way to the number one position six weeks after its debut. The song also received massive airplay in the UK, which helped propel Back to Bedlam to number one on the UK Albums Chart. The extensive airplay ultimately led to Blunt and his co-writers being awarded the Ivor Novello Award for Most Performed Work. After the success of "You're Beautiful" in the UK, the song crossed over to mainland Europe, becoming one of the biggest hits of summer 2005 across the continent. "Goodbye My Lover" was released as the fourth UK single from the album in December 2005, and was later the second US single. The album eventually sold 11 million copies and topped the album charts in 16 territories worldwide. It was the best sold album in 2006 in the world.

Blunt's second studio album, All the Lost Souls, was released on 18 September 2007 in North America, one day after its release in the United Kingdom. It sold 65,000 units in its first week, and was certified gold in the UK after only four days. Blunt completed the album's songs at his home in Ibiza in the winter of 2006–2007.