He was born at Hadleigh, Suffolk, and educated at Westminster School, and Trinity College, Cambridge from 1583. His Roxana, a Latin tragedy, was performed around 1592, and printed in 1632. Roxana is founded on the La Dalida (Venice, 1567) of Luigi Groto, known as Cieco di Hadria, and Hallam asserts that it is a plagiarism (Literature of Europe, iii.54). A surreptitious edition in 1632 was followed by an authorized version a plagiarii unguibus vindicata, aucta et agnita ab Authore, Gulielmo Alabastro.
He became a Roman Catholic convert in Spain when on a diplomatic mission as chaplain. His religious beliefs led him to be imprisoned several times; eventually he gave up Catholicism, and was favoured by James I. He received a prebend in St Paul's Cathedral, London, and the living of Therfield, Hertfordshire. He died at Little Shelford, Cambridgeshire.
One book of an epic poem in Latin hexameters, in honour of Queen Elizabeth, is preserved in MS. in the library of Emmanuel College, Cambridge. This poem, Elisaeis, Apotheosis poetica, Spenser highly esteemed. "Who lives that can match that heroick song?" he says in Colin Clout's come home againe, and begs "Cynthia" to withdraw the poet from his obscurity.
In June 1596 Alabaster sailed with Robert Devereux, Earl of Essex, on the expedition to Cadiz in the capacity of chaplain, and, while he was in Spain, he became a Roman Catholic. An account of his change of faith is given in an obscurely worded sonnet contained in an MS. copy of Divine Meditations, by Mr Alabaster (see J. P. Collier, Hist. of Eng. Dram. Poetry, ii.341). He defended his conversion in a pamphlet, Seven Motives, of which no copy is extant. The proof of its publication only remains in two tracts, A Booke of the Seuen Planets, or Seuen wandring motives of William Alablaster's wit, by John Racster (1598), and An Answer to William Alabaster, his Motives, by Roger Fenton (1599). From these it appears that Alabaster was imprisoned for his change of faith in the Tower of London during 1598 and 1599.
In 1607 he published at Antwerp Apparatus in Revelationem Jesu Christi, in which his study of the Kabbalah gave a mystical interpretation of Scripture. The book was placed on the Index Librorum Prohibitorum at Rome early in 1610. Alabaster says in the preface to his Ecce sponsus venit (1633), a treatise on the time of the second advent of Christ, that he went to Rome and was there imprisoned by the Inquisition, but succeeded in escaping to England and again embraced the Protestant faith.
Alabaster's other cabalistic writings are Commentarius de Bestia Apocalyptica (1621) and Spiraculum tubarum (1633), a mystical interpretation of the Pentateuch. These theological writings won the praise of Robert Herrick, who calls him "the triumph of the day" and the "one only glory of a million".