Neal was born to Maude Jean Scheuer and Neal Marshall Cassady. After his mother died when he was ten, he was raised by his alcoholic father in Denver, Colorado. Neal spent much of his youth living on the streets of skid row with his father, or spending time in reform school. As a youth, Neal was repeatedly involved in petty crime. He was arrested for car theft when he was 14, for shoplifting and car theft when he was 15, and for car theft and fencing when he was 16.

In 1941, the 15-year old Neal met Justin W. Brierly, a prominent Denver educator. Brierly was well known as a mentor of promising young men, and, impressed by Neal's intelligence, Brierly took an active role in Neal's life over the next few years. He helped admit Neal to East High School where he taught, encouraged and supervised his reading, and found employment for him. Neal continued his criminal activities, however, and was repeatedly arrested from 1942 to 1944; on at least one of these occasions, he was released by law enforcement into Brierly's safekeeping.

In June 1944, Neal was arrested for receipt of stolen property, and served eleven months of a one-year prison sentence. He and Brierly actively exchanged letters during this period even through Neal's intermittent incarcerations; these represent Neal's earliest surviving letters. Brierly, apparently a closeted homosexual, is also believed to have been responsible for Neal's first homosexual experience.

In 1947, Neal moved to New York City, where he met Jack Kerouac and Allen Ginsberg at Columbia University through Hal Chase, another protégé of Justin W. Brierly's. Although Neal did not attend Columbia, he soon became friends with them and their acquaintances, some of whom later became members of the Beat Generation. Ginsberg immediately fell in love with him, and Neal, who had a hustler's instinct to be whatever the person he's with wants him to be, began a sexual relationship with Ginsberg, balancing it with the numerous heterosexual relationships he enjoyed more. At the same time, he persuaded Kerouac to teach him how to write fiction. His sexual relationship with Ginsberg lasted off and on for the next twenty years, and he later traveled cross-country with Kerouac.

Neal married several women and fathered many children (much of this activity is discussed in 'On The Road'). He finally settled down with Carolyn Cassady in Los Gatos, a suburb near San Jose, where he worked as a brakeman on the Southern Pacific railroad.

Following an arrest during 1958 for offering to share a small amount of marijuana with an undercover agent at a San Francisco nightclub, Neal served a sentence at San Quentin State Prison. After his release in June 1960, he struggled to meet family obligations, and his wife divorced him when his parole period expired in 1963. Neal shared an apartment with Allen Ginsberg and Charles Plymell in 1963 at 1403 Gough Street, San Francisco.

In January 1967, Neal traveled to Mexico with fellow George "Barely Visible" Walker and longtime girlfriend Anne Murphy. During the next year, Neal's life became less stable and the pace of his travels became more frenetic. He left Mexico in May, traveling to San Francisco, California; Denver, Colorado; New York City, New York and points in between: then returned to Mexico in September and October (stopping in San Antonio, Texas on the way to visit his oldest daughter who had just given birth to his first grandchild); visited Ken Kesey's Oregon farm in December; and spent the New Year at a friend's house near San Francisco. Finally, during late January, 1968, Neal returned to Mexico once again.

On February 3, 1968, Neal attended a wedding party in San Miguel de Allende, Guanajuato, Mexico. After the party he went walking along a railroad track to reach the next town, but passed out in the cold and rainy night wearing nothing but a T-shirt and jeans. In the morning, he was found in a coma by the track and taken to the closest hospital, where he died a few hours later on February 4, four days short of his forty-second birthday.

Neal's unfinished autobiography was published as 'The First Third' after his death. Some of his letters, such as the one Kerouac called 'The Great Sex Letter,' were also published.