Goodman was born in Chicago, the ninth of twelve children of poor Jewish immigrants from the Russian Empire, who lived in the Maxwell Street neighbourhood. His father, was David Gutman, a tailor from Warsaw, his mother was Dora Rezinski (from Kaunas) and his birthname was Beno.

Goodman left for New York City and became a successful session musician during the late 1920s and early 1930s. He made a reputation as a solid player who was prepared and reliable. He played with the nationally known bands of Ben Selvin, Red Nichols, Isham Jones, and Ted Lewis. He also recorded musical soundtracks for movie shorts; some fans are convinced that Benny Goodman's clarinet can be heard on the soundtrack of One A. M., a Charlie Chaplin comedy re-released to theaters in 1934.

In 1934 Goodman auditioned for NBC's Let's Dance, a well regarded radio program that featured various styles of dance music. Since he needed new arrangements every week for the show, his agent, John Hammond, suggested that he purchase jazz charts from Fletcher Henderson, an African-American musician from Atlanta who had New York's most popular African-American band in the 1920s and early 1930s.

Goodman, a wise businessman, caught Henderson in 1929 when the stock market crashed. He purchased all of Henderson's song books, and hired Henderson's band members to teach his musicians how to play the music.

The combination of Goodman's solid clarinet playing, the Henderson charts, and the well-rehearsed band made Goodman a rising star in the mid-1930s, earning him the title "King of Swing." In early 1935, Goodman and his band were one of three bands featured on Let's Dance.

His radio broadcasts from New York aired too late to attract a large East Coast audience. However, unknown to him, the timeslot gave him an avid following on the West Coast. He and his band remained on Let's Dance until May of that year when a strike forced the cancellation of the radio show.

With nothing else to do, the band set out on a tour of America. However, at a number of engagements the band received a hostile reception, as many in the audiences expected smoother, sweeter jazz as opposed to the "hot" style that Goodman's band was accustomed to playing. By August of 1935, Goodman found himself with a band that was nearly broke, disillusioned and ready to quit. It was at this moment that everything for the band and jazz changed.

In July 1935, a record of the Goodman band playing the Henderson charts on "King Porter Stomp" backed with "Sometimes I'm Happy," Victor 78 25090, had been released to ecstatic reviews in both Down Beat and Melody Maker. This had made little impact on the tour, and the last scheduled stop came on August 21, 1935 at the Palomar Ballroom in Los Angeles, Goodman and his band scheduled for a three-week engagement. The Palomar provided the ideal environment, as there was a huge dance floor with a capacity of 4,000 couples.

In late 1937, Goodman's publicist Wynn Nathanson attempted a publicity stunt in the form of suggesting Goodman and his band should play Carnegie Hall in New York City. "Benny Goodman was initially hesitant about the concert, fearing for the worst; however, when his film Hollywood Hotel opened to rave reviews and giant lines, he threw himself into the work. He gave up several dates and insisted on holding rehearsals inside Carnegie Hall to familiarize the band with the lively acoustics."

The concert was the evening of January 16, 1938. It sold out weeks before, with the capacity 2,760 seats going for the top price of US$2.75 a seat, for the time a very high price. The concert began with three contemporary numbers from the Goodman band—"Don't Be That Way," "Sometimes I'm Happy," and "One O'Clock Jump." Then came a history of jazz, starting with a Dixieland quartet performing "Sensation Rag."

Once again, initial crowd reaction, though polite, was tepid. Then came a jam session on "Honeysuckle Rose" featuring members of the Count Basie and Duke Ellington bands as guests. It did not go as well as hoped. As the concert went on, things livened up. The Goodman band and quartet took over the stage and performed the numbers that had already made them famous.

Some of the later trio and quartet numbers were well-received, and a vocal on "Loch Lomond" by Martha Tilton, though nothing special, provoked five curtain calls and cries for an encore. The encore forced Goodman to make his only audience announcement for the night, stating that they had no encore prepared but that Martha would return shortly with another number.

By the time the band got to the climactic piece "Sing, Sing, Sing," success of the night was assured. Bettering the commercial 12-inch record, this live performance featured playing by tenor saxophonist Babe Russin, trumpeter Harry James, and then Benny Goodman, backed by drummer Gene Krupa in accompaniment.

But the really unforgettable moment came when Goodman finished his solo and unexpectedly tossed the ball to pianist Jess Stacy. "At the Carnegie Hall concert, after the usual theatrics, Jess Stacy was allowed to solo and, given the venue, what followed was appropriate. Used to just playing rhythm on the tune, he was unprepared for a turn in the spotlight, but what came out of his fingers was a graceful, impressionistic marvel with classical flourishes, yet still managed to swing. It was the best thing he ever did, and it's ironic that such a layered, nuanced performance came at the end of such a chaotic, bombastic tune."

This concert has been regarded by some as the most significant in jazz history. After years of work by musicians from all over the country, jazz had finally been accepted by mainstream audiences. While the big band era would not last for much longer, it was from this point forward that the ground work for multiple other genres of popular music was laid.