Thewlis, the second of three children, was born David Wheeler in Blackpool, Lancashire to Maureen Thewlis and Alec Raymond Wheeler, both of whom were shopkeepers at the toy store owned by the family. He took his stage name after his mother's maiden name. As a teen, he played lead guitar with a punk-rock band called Door 66. He studied at the Guildhall School of Music and Drama in London and graduated in 1985.

Thewlis' first major film role was as the rambling street philosopher Johnny in Naked (1993; dir. Mike Leigh), for which he was named best actor by the National Society of Film Critics (United States), the London Film Critics Circle, the Evening Standard, the New York Film Critics Circle and the Cannes Film Festival. Despite the dark nature of the film, he has been critically acclaimed for the role and it is seen as one of his best roles. The same year he appeared on television as the sexual predator James Jackson in Prime Suspect 3, opposite Helen Mirren and Ciaran Hinds.

Through the 1990s, Thewlis appeared in a variety of films, mostly fantasy and period, including Restoration(1995), Black Beauty (1994), Total Eclipse (1995) with Leonardo DiCaprio, Dragonheart (1996), and Seven Years in Tibet (1997), opposite Brad Pitt (because of this film, Thewlis is barred from entering China). He was nominated for a British Independent Film Award for Divorcing Jack (1998), and played Clov in a (2000) television film of Samuel Beckett's Endgame. Notable appearances also include Bernardo Bertolucci's Besieged (1998) and Paul McGuigan's Gangster No. 1 (2000), opposite Malcolm McDowell.

In 2004, he starred as Remus Lupin in Harry Potter and the Prisoner of Azkaban (dir. Alfonso CuarĂ³n), a role he is to reprise in the coming film in the series: Harry Potter and the Order of the Phoenix. He originally auditioned for the role of Professor Quirrell in the film Harry Potter and the Philosopher's Stone, but the role eventually went to Ian Hart. His acting talent also led him to a part in the Dinotopia movie as the villain, Cyrus Crabb.

Recent credits include Ridley Scott's Kingdom of Heaven (2005), Terrence Malick's The New World (2005) and The Omen (2006). As a director, he was nominated for a BAFTA for best short film for Hello, Hello, Hello (1995); he has also written, directed and starred in the feature Cheeky (2003).

In 1992, Thewlis married director Sara Sugarman; they divorced in 1993. He is currently living with the actress Anna Friel. They both starred in the 2003 film Timeline although they shared no scenes together. Their daughter Gracie was born on 9 July 2005 in London.

Thewlis has been praised for his performance in Naked, which, despite its dark tone, is considered by critics and fans alike to be his best role to date. He has won the following awards for his work in Naked: