Paul Gardner Allen was born in Seattle, Washington to parents Kenneth S. Allen, an associate director of the University of Washington libraries, and Faye G. Allen, in 1953. Allen attended Lakeside School, a prestigious private school in Seattle, and befriended Gates, who was two years his junior but shared a common enthusiasm for computers. Allen was a model student in his years at Lakeside School. They used Lakeside's teletype terminal to develop their programming skills on several timesharing computer systems. After graduation, Allen attended Washington State University, and was an active member in Phi Kappa Theta Fraternity, though he dropped out after two years to go and work as a programmer for Honeywell in Boston, which placed him near his old friend again. He later convinced Gates to drop out of Harvard University in order to create Microsoft.

With Bill Gates, he co-founded Microsoft (initially "Micro-Soft") in Albuquerque, New Mexico, in 1975, and began selling a BASIC programming language interpreter. In 1980, Allen spearheaded a deal for Microsoft to buy an operating system called 86-DOS (QDOS) for $50,000. Due to IBM deadlines, Gates and Allen felt that they didn't have enough time to develop an operating system from scratch; they therefore purchased the fully functional QDOS and reworked the code to fit IBM's needs. Microsoft won a contract to supply the finished program for use as the operating system of IBM's new PC. This became a foundation of Microsoft's growth.

Much of Paul Allen's success has been dedicated to health and human services and toward the advancement of science and technology. The Paul G. Allen Family Foundation was established in 1986 to administer much of the giving. Through the Foundation, Allen awards approximately $30 million in grants annually. Roughly 60 percent of the Foundation's money goes to non-profit organizations in Seattle and the state of Washington and 12 percent to Portland, Oregon. The remaining 28 percent is distributed to other cities within the Pacific Northwest. Allen also contributes through other charitable projects known as "venture philanthropy". The most famous of those projects are Experience Music Project, the Science Fiction Museum and Hall of Fame, Allen Institute for Brain Science, and the Search for Extraterrestrial Intelligence through the Allen Telescope Array. The Allen Institute for Brain Science is located at 551 N 34th Street, Seattle, WA, 98102 (Fremont neighborhood of Seattle).