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Born into a working class family (his father, Fred Ferry, was a farmer who also looked after pit ponies), Ferry attended Washington Grammar-Technical School (now called Washington School) on Spout Lane from 1957 and achieved nine O levels, then studied fine art at the University of Newcastle upon Tyne under Richard Hamilton. His contemporaries included Tim Head and Nick de Ville. Ferry became a pottery teacher at Holland Park School in London. Ferry formed the band The Banshees, and later, together with Graham Simpson and John Porter, the band the Gas Board.

Ferry formed Roxy Music with a group of friends and acquaintances, beginning with Graham Simpson, in November 1970. Roxy Music's first hit, "Virginia Plain", made the UK Top 5 in 1972, and was followed up with several hit singles and albums, with Ferry as vocalist and occasional instrumentalist (he taught himself piano in his mid-twenties).

Several of the women Ferry had been involved with have appeared as cover models on the Roxy Music albums. Ferry dated the French singer and model Amanda Lear, who was photographed with a black jaguar for the cover of the For Your Pleasure album. She later went on to date David Bowie.

Ferry was listed as one of the fifty best-dressed over 50s by the Guardian in March 2013.

For many years, Ferry has collaborated with fashion designer Antony Price for clothing and image consultations. Price is famous for his shop on London's Kings Road. He created suits recognised worldwide for their elegance, and gained fame when celebrities and rock stars dressed in his designs. Indeed, Nicky Haslam commented that Ferry was more likely to redecorate a hotel room than to trash it as a typical rock star might.

Ferry began a relationship with Amanda Sheppard, one of his son's ex-girlfriends. Sheppard worked in public relations until she quit her job in 2009 after Ferry offered to support her financially. In early January 2012, Ferry married Sheppard in a private ceremony on the Turks and Caicos Islands.

Ferry was estimated to have a fortune of £30 million in the Sunday Times Rich List of 2010.