Wahlberg was born in Dorchester, Massachusetts, as the eighth of nine children, with older siblings Arthur, Jim, Paul, Robert, and Tracey, Michelle, Debbie, and younger sibling Mark. His father, Donald Edward Wahlberg, was a delivery driver, and his mother, Alma Elaine Donnelly, was a nurse and bank employee; the two divorced in 1982. His paternal grandfather was of Swedish descent, while the majority of his other ancestry is Irish.

Wahlberg began performing in plays as early as the first grade. In high school, he attended a fledgling arts program and became involved in theatre, acting, writing, and directing plays, although all of his teachers agreed his acting talent was miniscule. In April 1991 he was charged and arrested with first degree arson. He apparently was trying to set a hotel on fire with a molotov cocktail fire bomb. These charges were later reduced then dropped because he agreed to do public service commercials.

At age fifteen, Wahlberg joined New Kids on the Block and in a few years they went from playing at high school parties to becoming the pop music sensation. Donnie was known as the "bad boy" of the group and was known to curse during live performances on awards shows. In 1990, Wahlberg scored a hit on the Top 100 with "The Right Combination", a duet with Japanese pop star Seiko Matsuda who was attempting to cross over to North America from the Japanese market. Following the group's disbanding in 1994, Wahlberg made a decision to go in another direction, focusing on writing and producing for his younger brother, Mark Wahlberg was later offered the chance to reunite with his bandmates for a VH1 television show, but like a majority of the group, he declined, citing his desire to focus on his acting career.

In 1994, Wahlberg was a special guest celebrity at WrestleMania X, acting as special guest ring announcer for the main event, as well as joining Bret Hart, along with other wrestlers, in celebrating his World Championship win.

As an actor, Wahlberg's first film appearance was in the 1996 film Bullet with Mickey Rourke, a project that lit a spark in him, motivating him to continue to work on his craft. Also in 1996, he appeared as a kidnapper in over his head in Ransom with Mel Gibson. Wahlberg received attention for his role in the 1999 film The Sixth Sense, playing the distraught patient of Bruce Willis's character in the opening sequence. This role was originally intended for a 13-year-old boy until Wahlberg met with writer and director M. Night Shyamalan to inquire about obtaining the rights for a theatre production and ended up getting this pivotal role.

In 2001, Wahlberg co-starred as 2nd Lieutenant C. Carwood Lipton in the Emmy Award-winning television miniseries Band of Brothers. Wahlberg also starred in the 2002–2003 NBC drama series Boomtown as Joel Stevens, an intense Los Angeles police detective struggling to keep his troubled home life private while remaining dedicated to facing the challenges of his daily work life. Graham Yost, executive producer and writer of Boomtown, had worked with Wahlberg in Band of Brothers and was so impressed by his performance that he wrote the role of Joel Stevens specifically for him.

2003 was also the year that Wahlberg starred along side Timothy Olyphant and Jason Lee as the mentally challenged Duddits in William Goldman and Lawrence Kasdan's adaptation of the Stephen King alien-invasion thriller, Dreamcatcher. In 2005, Wahlberg starred as Detective Eric Matthews in the second installment of the Saw series. He reprised the role for Saw III.

In September 2006, he had the lead role of the short-lived television drama Runaway on The CW. The show was cancelled in October 2006, as it had very poor ratings and failed to make an impact. In 2007, he starred alongside Jason Gedrick, Ricardo Chaivera, and Nadine Velasquez in the television movie Kings of South Beach on A&E.

Wahlberg is a body art enthusiast; he has had his left ear pierced four times, as well as piercings in his left nostril and his left nipple. He also has a tattoo of his family crest on his left arm. Wahlberg lives in Los Angeles with his wife Kim, and sons Xavier and Elijah.

A nickname by which Wahlberg has been known is "Dennis Cheese", and he is credited this way for the rap he performs on Tiffany's song "New Inside", the title track to her 1990 album.

Wahlberg is a Boston Celtics fan, as he can be seen attending the games and joining Tommy Heinsohn and Mike Gorman announcing the game as a special guest. His favorite book is The Chocolate War by Robert Cormier.