Steegmuller was born on July 3, 1906 in New Haven, Connecticut. He was educated in the public schools of Greenwich, Connecticut, and graduated from Columbia University in 1927. While at Columbia, Steegmuller's friends included Lionel Trilling, Clifton Fadiman, Jacques Barzun, Meyer Shapiro, Richard Snow, and Dwight Minor. After graduation, Steegmuller spent time in Europe, but became disillusioned by events in Germany and Italy in the 1930s and returned home, eventually serving in United States military. After the war, he returned to France, working initially in military intelligence. Steegmuller divided his time between Europe and New York City throughout the rest of his life.

Steegmuller was the author of many works about French culture and literary figures, and a translator of Gustave Flaubert. He was the recipient of many literary honors. He received two National Book Awards: in 1971, for his biography of Jean Cocteau, and in 1981 for his translation for the first volume of Flaubert's complete letters. Steegmuller was awarded a gold medal in biography by the American Academy and Institute of Arts in 1982. He was also a Chevalier of the Legion of Honor.

Steegmuller's first wife was Beatrice Stein (1899-1961), a painter who was a pupil and friend of Jacques Villon. She suffered from polio, and died in 1961. He married the writer Shirley Hazzard (1931-2016) in 1963.

Steegmuller died in Naples, Italy on October 20, 1994.