Bay was born in Los Angeles and raised there by his adoptive parents. He was educated at the Art Center College of Design in Pasadena and graduated from Wesleyan University.

After graduating from school, Bay broke in to the music video industry and worked on videos for artists such as Meat Loaf, Richard Marx, Donny Osmond, Lionel Richie, and Tina Turner, among many others. He also began directing television commercials for many large companies, including Nike, Reebok, Budweiser, and Coca-Cola. His most successful advertising campaign creation was the series of "Got Milk?" commercials, which won him the Grand Prix Clio for Commercial of the Year and the Cannes Silver Lion.

The first movie to be directed by Bay was Bad Boys in 1995, which was a box office success. He has since followed this with several more large-budget, action-oriented films. All these movies combined took in more than $1.5 billion dollars worldwide.

His films are known for both their fast paced action sequences and ultra-kinetic cinematography reminiscent of director Tony Scott.

Bay and Wydncrest Holdings recently bought the special effects company Digital Domain from former owners James Cameron and Stan Winston. He also runs his producing company Platinum Dunes that produces horror genre films (mostly commercially successful remakes of 1970s films).

In 1995, Bay was honored by the Directors Guild of America as Commercial Director of the Year.

Bay has won many MTV Video Music Awards.

Bay has also been nominated several times, but never won, a Razzie Award. His past nominations include Worst Director (Pearl Harbor, 2001), Worst Director (Armageddon, 1998), and Worst Picture (Armageddon, 1998, shared with Jerry Bruckheimer and Gale Anne Hurd)