Taylor was born into a wealthy family at Bishopwearmouth, present day Sunderland, in north-east England. His father owned a brewery. After attending school at the Grange in Sunderland, and studying for two sessions at the University of Glasgow, he became a student of Cambridge University's Trinity College in 1837. In 1840 he received a B.A. with honors in both classics and mathematics, and a master's degree in 1843.
Taylor began his working life as a journalist. Soon after moving to London, he wrote for the Morning Chronicle and the Daily News. He was on the staff of Punch magazine until 1874, when he succeeded Charles William Shirley Brooks as editor. He was also an art critic for The Times and The Graphic. At the same time, for two years, he was a professor of English literature at University College, London. He was accepted as a lawyer of Middle Temple in November 1846 and practised the northern circuit until he became assistant secretary of the Board of Health in 1850. On the reconstruction of the Board in 1854 he was made Secretary, and on its abolition his services were transferred to a department of the Home Office, retiring on a pension in 1876. In 1855, he married Laura Barker, an accomplished musical performer and composer.
Taylor also wrote about painters, editing the Autobiography of B. R. Haydon (1853), the Autobiography and Correspondence of C. R. Leslie, R.A. (1860), and writing Life and Times of Sir Joshua Reynolds (1865). He also edited Pen Sketches from a Vanished Hand, selected from papers of Mortimer Collins.
He died at his home in Battersea, London, in 1880 at the age of 62 and is buried in Brompton Cemetery.
From an early age, Taylor had shown a predilection for theatre and performed dramas with a number of children in a loft over a brewer's stable.
During 1842, Taylor, together with his Cambridge friends Frederick Ponsonby (Earl of Bessborough), Charles G Taylor and William Bolland, formed the Old Stagers, which is recognised as the oldest amateur drama society still performing. The Old Stagers were invited to perform at the Canterbury Theatre during the Canterbury Cricket Week. Taylor performed, under his nom de theatre "J. Noakes, Esq", with the Old Stagers for more than 20 years. He was usually also Stage Manager and wrote many epilogues at the end of the Canterbury Cricket Week. He and the Old Stagers also performed in Royal Leamington Spa in 1852, and at the Theatre Royal during the I Zingari Cricket Week of 1853. Most of the Old Stagers played cricket for I Zingari during the day and performed on the stage in the evening, but there is no evidence to suggest that Taylor played cricket.
Four of Taylor's burlesques were produced at the Lyceum Theatre in London in 1844. His first success was To Parents and Guardians, produced at the Lyceum in 1845. Taylor eventually produced about 100 plays, although many were adaptations from the French or collaborations with other playwrights, notably Charles Reade. Some of his plots were adapted from the novels of Charles Dickens or others. Many of Taylor's plays were extremely popular. The best of them include Masks and Faces (1852, with Reade), Plot and Passion (1853), Still Waters Run Deep (1855), The Ticket-of-Leave Man (1863), which introduced Hawkshaw the Detective, and Arkwright’s Wife (1873). He also wrote a series of historical dramas (many in blank verse, including The Fool’s Revenge (1869), 'Twixt Axe and Crown (1870), Jeanne d'arc (1871), Lady Clancarty (1874) and Anne Boleyn (1875)). His historical dramas were collected in book form in 1877. In 1871, Taylor supplied the words to Arthur Sullivan's dramatic cantata, On Shore and Sea.
Taylor's plays are mostly forgotten today, although several survived into the 20th century. His most famous play is Our American Cousin, remembered mostly for its association with Abraham Lincoln's assassination.