Wales' father worked as a grocery store manager while his mother, Doris, and his grandmother, Erma, ran a small private school "in the tradition of the one-room schoolhouse" where Wales received his education. Most of the time there were four children in his grade so the school grouped the first through fourth grade students together and the fifth through eighth grade students together.

After eighth grade, Wales attended Randolph School, a university-preparatory school in Huntsville, Alabama, which was an early supporter of computer labs and other technology for student use. Wales has said that the school was expensive for his family, but that education was regarded as important. "Education was always a passion in my household - you know, the very traditional approach to knowledge and learning and establishing that as a base for a good life." He received his Bachelor's degree in finance from Auburn University and started with the Ph.D. finance program at the University of Alabama, where he left with a Master's in finance. After that, he took courses offered in the Ph.D. finance program at Indiana University. He taught at both universities during his postgraduate studies, but did not write the doctoral dissertation required to earn a Ph.D

Wales served as research director at Chicago Options Associates, a futures and options trader in Chicago. By "speculating on interest rate and foreign-currency fluctuations" he had soon earned enough to "support himself and his wife for the rest of their lives", according to Daniel Pink of Wired Magazine.

In a 2007 interview Wales said that in 1999 he had a student design software for a top-down design multilingual encyclopedia website, however it was too slow to be usable.

In March 2000, he started a peer-reviewed, open-content encyclopedia, Nupedia ("the free encyclopedia").

In January of 2001, Wales started Wikipedia, which was originally intended to be a wiki-based site for collaboration on early encyclopedic content for submission to Nupedia, but Wikipedia's rapid growth soon outstripped Nupedia's process capacity to review new content. Wales has said that he initially was so worried with the concept that he would wake up in the middle of the night, wanting to check the site for vandalism.

In mid-2003, Wales set up the Wikimedia Foundation, a non-profit organization based in St. Petersburg, Florida, to support Wikipedia and its younger sibling projects. He appointed himself and two business partners who are not active Wikipedians to the five-member board; the remaining two members are elected community representatives.

Wales has explained his motivations about Wikipedia in an interview with Slashdot: "Imagine a world in which every single person on the planet is given free access to the sum of all human knowledge. That's what we're doing."

Wales co-founded Wikia, Inc. with Angela Beesley in 2004 to provide community-based wikis inspired by the model of Wikipedia.

Wikia is a consumer destination site where you can read, discuss and share information and opinions on any topic and in any language. Wikia currently has over 500,000 pages of content in more than 55 languages and generates over 80 million page views per month.