Paterson's early education came from a governess, but when he was able to ride a pony, he was taught at the bush school at Binalong. In 1874 Paterson was sent to Sydney Grammar School, performing well both as a student and a sportsman. Matriculating at 16, he took up the role of an articled clerk in a law firm and on 28 August 1886 Paterson was admitted as a qualified solicitor.
In 1885, Paterson began submitting and having his poetry published in the Sydney edition of The Bulletin under the pseudonym of "The Banjo", the name of a favourite horse. Paterson, like The Bulletin, was an ardent nationalist, and in 1889 published a pamphlet, Australia for the Australians which told of his disdain for cheap labour and his admiration of hard work and the nationalist spirit. In 1890, The Banjo wrote "The Man from Snowy River", a poem which caught the heart of the nation, and in 1895 had a collection of his works published under that name. This book is the most sold collection of Australian Bush poetry and is still being reprinted today. Paterson also became a journalist, lawyer, jockey, soldier and a farmer.
On 8 April 1903 he married Alice Emily Walker in Tenterfield. Their first home was in Queen Street, Woollahra. The Patersons had two children, Grace (born in 1904) and Hugh (born in 1906).
Paterson became a war correspondent for The Sydney Morning Herald and The Age during the Second Boer War, sailing for South Africa in October 1899. His graphic accounts of the surrender of Bloemfontein (the first correspondent to ride in), the capture of Pretoria and the relief of Kimberley attracted the attention of the press in Britain. He also was a correspondent during the Boxer Rebellion, where he met George "Chinese" Morrison and later wrote about his meeting. He was editor of the Sydney Evening News (1904-06) and of the Town and Country Journal. (1907-08)
In World War I, Paterson tried unsuccessfully to become a correspondent covering the fighting in Flanders, but did become an ambulance driver with the Australian Voluntary Hospital, Wimereux, France. He returned to Australia early in 1915 and, as an honorary vet, travelled on three voyages with horses to Africa, China and Egypt. He was commissioned in the 2nd Remount Unit, Australian Imperial Force on 18 October 1915.
Paterson died of a heart attack in Sydney on 5 February 1941. Paterson's grave, along with the grave of Alice Walker, is in the Northern Suburbs Memorial Gardens and Crematorium, Sydney.
Paterson's poems mostly presented a highly romantic view of rural Australia. Paterson himself, like the majority of Australians, was city-based and was a practising lawyer. His work is often compared to the prose of Henry Lawson, a contemporary of Paterson's, including his work "The Drover's Wife", which presented a considerably less romantic view of the harshness of rural existence of the late 19th century.
Paterson authored two novels; An Outback Marriage (1906) and The Shearer's Colt (1936), wrote many short stories; Three Elephant Power and Other Stories (1917), and wrote a book based on his experiences as a war reporter; Happy Dispatches (1934). He also wrote a book for children The Animals Noah Forgot (1933)
Media reports in August 2008 stated that a previously unknown poem had been found in a war diary written during the Boer War.
The A. B. 'Banjo' Paterson Library at Sydney Grammar School was named after Banjo Paterson.