Webb was raised on the family farm in rural Panola County, Texas. After graduating from Ranger High School in Ranger in Eastland County, he earned a teaching certificate and taught at several Texas schools. He eventually attended the University of Texas at Austin and graduated with a Bachelor of Arts in 1915 at the age of twenty-seven. He worked as bookkeeper in San Marcos and optometrist's assistant in San Antonio, then in 1918 he was invited to join the history faculty at the University of Texas. He wrote his Master of Arts thesis on the Texas Rangers in 1920 and was encouraged to pursue his PhD. After a year of study at the University of Chicago, he returned to Austin, where he began a historical work on the West. The result of this work was The Great Plains, published in 1931, hailed as great breakthrough in the interpretation of the history of the region, and declared the outstanding contribution to American history since World War I by the Social Science Research Council in 1939. He was awarded his PhD for his work on The Great Plains in 1932, the year after its publication.

In 1939-1946 he served as president of the Texas State Historical Association. During his tenure as president, he launched a project to produce an encyclopedia of Texas, which was subsequently published in 1952 as the Handbook of Texas. Webb wrote or edited more than 20 books. One of them, The Texas Rangers (1935) is considered the definitive study of the legendary Texas Rangers and its Captain Bill McDonald.

In 1958 Webb served as president of the American Historical Association.

Webb was killed in an automobile accident near Austin, Texas in 1963.In his honor the University of Texas established the Walter Prescott Webb Chair of History and Ideas. Webb Middle School in Austin, Texas is also named after him