Matthau was born in New York City, in the Lower East Side, Manhattan, the son of Russian-Jewish immigrants, and attended Seward Park High School. His original surname is often shown as Matuschansky, but this is not true (see Original Name Rumour below for a detailed discussion). His real name, as records from his youth prove, was Walter John Matthow. However, he was also called "Jake", so he occasionally signed his name as "Walter Jake Matthow". When, as a young man, he began acting in the Yiddish theatre in New York, he decided to change the spelling of his name. He believed that "Matthow" looked too brash and crude and opted for the "more-elegant" spelling of "Matthau", and kept it for the rest of his life.

During World War II Matthau served in the U.S. Army Air Forces with the Eighth Air Force in England as a B-24 Liberator radioman-gunner, in the same bomb group as Jimmy Stewart. He reached the rank of Staff Sergeant and became interested in acting. He often joked that his best early review came in a play where he posed as a derelict. One reviewer said, "The others just looked like actors in make-up, Walter Matthau really looks like a skid row bum!" Matthau was a respected stage actor for years in such fare as Will Success Spoil Rock Hunter? and A Shot in the Dark. He won the 1962 Tony Award for Best Featured Actor in a play. In 1952 Matthau appeared in the pilot of Mr. Peepers with Wally Cox. For reasons unknown he used the name Leonard Elliot. His role was of the gym teacher Mr. Wall. He was very good and why he was not picked up for the series is a good question. In 1955 he made his motion picture debut as a whip-wielding bad guy in The Kentuckian opposite Burt Lancaster. He appeared in many movies after this as a villain such as the 1958 King Creole (where he is beaten up by Elvis Presley). That same year, he made a western called Ride a Crooked Trail with Audie Murphy and the notorious flop Onionhead starring Andy Griffith and Erin O'Brien. Matthau also directed a low budget 1960 movie called The Gangster Story. In 1962, he won acclaim as a sympathetic sheriff in Lonely are the Brave. He also played a villainous war veteran in Charade, which starred Cary Grant and Audrey Hepburn.

In addition to his busy movie and stage schedule, Matthau made many television appearances in live TV plays. Although he was constantly working, it seemed that the fact that he was not handsome in the traditional sense would keep him from being a top star.
Matthau with Jack Lemmon in a publicity photo for The Fortune Cookie
Matthau with Jack Lemmon in a publicity photo for The Fortune Cookie

Success came late for Matthau. In 1965, aged 44, Neil Simon cast him in the hit play The Odd Couple opposite Art Carney. It was during this time that Matthau nearly died of a heart attack. In 1966, he again achieved glory as a shady lawyer opposite future friend and frequent co-star, actor Jack Lemmon, in The Fortune Cookie.

He won an Academy Award for Best Actor in a Supporting Role for that movie, and also made a memorable acceptance speech. He was visibly banged up, having been involved in an auto accident shortly before the awards show. He started out with a joke about having "fallen off his bicycle", then scolded nominated actors who were perfectly healthy and had not bothered to come to the ceremony, especially three of the other four major award winners: Elizabeth Taylor, Sandy Dennis and Paul Scofield.

Matthau and Lemmon became lifelong friends after making The Fortune Cookie and made a total of ten movies together, including the movie version of The Odd Couple (with Lemmon playing the Art Carney role) and the popular 1993 hit Grumpy Old Men and its sequel Grumpier Old Men with Sophia Loren.

Matthau was married twice, to Grace Geraldine Johnson (1948-1958), and Carol Marcus (August 21, 1959 until his death on July 1, 2000). He had two children, Jenny Matthau and David Matthau, with his first wife, and a son, Charlie Matthau, with his second. His grandchildren include William Matthau and Emily Roman. His son, Charlie, directed Matthau in the movie The Grass Harp (1995).

Walter Matthau died of full cardiac arrest on July 1, 2000, in Santa Monica, California, at the age of 79. After heart surgery, doctors discovered that he had colon cancer, which had spread to his liver, lungs and brain. However, on his death certificate the causes of death are listed as cardiac arrest and atherosclerotic heart disease, with ESRD and atrial fibrillation added as "other significant conditions contributing to death but not related to [primary] cause..."

He is interred in the Westwood Village Memorial Park Cemetery in Westwood, California, next to fellow actor George C. Scott.
I think I can safely state, we have lost one of the greatest Hollywood comedians, ever.

Almost exactly one year later, Jack Lemmon was also buried at the cemetery, after dying from cancer. After Matthau's death, Lemmon as well as other friends and relatives appeared on Larry King Live in an hour of tribute and remembrance; poignantly, many of those same people appeared on the show one year later, reminiscing about Lemmon.

His widow, Carol, died of a brain aneurysm in 2003.