He was educated at Barry County School and St John's College, Cambridge (scholar and Strathcona Student, starred first in History 1936). (He was not, as sometimes erroneously stated, connected with Jesus College, Cambridge). He began to study for a PhD under John Clapham, but his progress was interrupted by the Second World War. In 1938 he was elected a Fellow of Pembroke College, Cambridge, a position he held until 1950. He worked in the Foreign Office 1939-42 and the Board of Trade 1942-46, during which period he still found time to carry out research at the Public Record Office and in the archives of country houses. After the War he was from 1946 until 1950 Director of Studies and Librarian of the college and Lecturer in the Faculty of Economics. In 1973 Pembroke elected him to an honorary fellowship. From 1950 until 1960 he was editor, with Michael Postan, of The Economic History Review.
In 1950 he moved to Oxford, where he would remain for the rest of his life. At the age of just thirty-five he had been appointed Chichele Professor of Economic History in the University of Oxford and Professorial Fellow of All Souls College. He held this appointment until 1967, when he became Principal of Jesus College. He also served as Vice-Chancellor of the university 1973-77 and Pro-Vice-Chancellor 1977-84. He retired in 1984 and was Ford Lecturer in the following year. All Souls re-elected him to a fellowship in 1988. He was also President of University College, Swansea from 1975 until 1984 and an honorary fellow of the college from 1991. He was Visiting Professor at Harvard University 1954/5 and at University of California, Berkeley (Ford Research Professor) 1962/3.
Habakkuk was elected a Fellow of the British Academy in 1965 and a member of the American Philosophical Society in 1966. He was appointed Knight Bachelor in 1976. In the same year he began a four-year term as President of the Royal Historical Society. He was awarded the degree of Doctor of Letters honoris causa by the Universities of Wales (1971), Cambridge (1973), Pennsylvania (1975), Kent (1978), and Ulster (1988).
He was a member of the Advisory Council on Public Records 1958-70, the Social Science Research Council 1967-71, the National Libraries Committee 1968-69, the Administrative Board of the International Association of Universities 75-84, and the Royal Commission on Historical Manuscripts 1978-90. He was Chairman of the Committee of Vice Chancellors and Principals of the Universties of the United Kingdom 1976-77, the Advisory Group on London Health Services 1980-81, and the Oxfordshire District Health Authority 1981-4.
Habakkuk was married to his former student, Mary Richards (died 2002), in 1948. They had a son and three daughters. He died, from renal failure and myelodysplasia, at the house of one of his daughters, Little Orchard, Scot Lane, Chew Stoke, on 3 November 2002.