Wales was born in Huntsville, Alabama, United States. He attended The Randolph School and a university-preparatory school, and then earned bachelor's and master's degrees in finance. While in graduate school, he taught at two universities. Wales later took a job in finance, and worked as the research director of a Chicago futures and options firm for several years. In 1996, he and two partners founded Bomis, a web portal that targeted males, and which hosted, and provided the initial funding for, the peer-reviewed encyclopedia Nupedia (2000–2003) and its successor, Wikipedia.
In 2001, together with Larry Sanger and others, Wales helped launch Wikipedia, a free, open content encyclopedia which enjoyed rapid growth and popularity. As Wikipedia's public profile grew, Wales became the project's promoter and spokesman. Wales is historically cited as a co-founder of Wikipedia, though he has disputed the "co-" designation in declaring himself the sole founder. Wales serves on the Board of Trustees of the Wikimedia Foundation, the non-profit charitable organization which operates Wikipedia. He holds its board-appointed "community founder" seat. In 2004, he co-founded Wikia, a privately owned, free Web-hosting service, with fellow Wikimedia trustee Angela Beesley.