Martin was born in New York City, New York to a Greek American family. He is the son of Lillian and Greek Orthodox priest Dean C. Martin. He grew up in Toms River, New Jersey, and has a younger brother named Spyro and a younger sister, Christene. She also was in Toms River High School North and graduated of class of 1991.
Martin graduated from Yale University in 1995. During his time there, he wrote a 224-word poem about alcoholism as a project for a fractal geometry class, which became a well known palindromic poem. He was also a member of the Anti-Gravity Society, whose members juggle objects on Sunday evenings on Yale's Old Campus.
Shortly after leaving law school, Martin started performing stand up in 1997. Four years later, in 2001, Martin caught his first big break in stand-up comedy when he appeared on Comedy Central's stand-up showcase Premium Blend. At the 2003 Edinburgh Festival Fringe he won the Perrier award with his show If I.... The show was turned into a BBC television special in 2004. From 2003 to 2004, Martin wrote for Late Night with Conan O'Brien. In 2004, Martin had his own Comedy Central Presents stand-up special. His special was divided into three parts. In the first, he performed in traditional stand-up comedy fashion. In the second segment, he used humorous drawings as visual aids, which would serve either as the punchline or a background. During the third segment, he played a guitar and put on a pseudo-play where he would strum his guitar while alternating between playing harmonica and talking; some of his Comedian friends dressed as fairies and dragons acted according to the story he was telling, detailing the magical land from where his jokes came. Martin's mother and grandmother also appeared.
He has recorded a comedy album titled These Are Jokes, which was released on September 26, 2006. This album also features Saturday Night Live member Will Forte and stand-up Comedian Leo Allen. Martin returned to The Daily Show on March 22, 2006, as the new Youth Correspondent, calling his segment "Professional Important News with Demetri Martin". In 2007, he starred with Faryl Millet, a Comedian and Actress better known for her show Fancy Nancy's Funny Hour, in a Fountains of Wayne music video for "Someone to Love" as Seth Shapiro, and Millet as Beth Mackenzie. Both of them characters in the song. He also starred in the video for the Travis single "Selfish Jean", in which he wears multiple T-shirts with lyrics written on them. On September 2, 2007, Martin appeared on the season finale of the HBO series Flight of the Conchords. He appeared as a keytar player named Demetri. He also had a part in the movie The Rocker (2008) starring Rainn Wilson. Martin played the part of the videographer when the band in the movie was making their first music video.
Starting in late 2005, he was credited as a contributor on The Daily Show, on which he appeared as the named "Senior Youth Correspondent" and hosted a segment called "Trendspotting." He used this segment to talk about so-called hip trends among youth such as hookahs, wine, guerilla marketing and Xbox 360. A piece about social networking featured his profile on MySpace. On March 22, 2007, Martin made another appearance on The Daily Show, talking about the Viacom lawsuit against Google and YouTube. He is no longer a Daily Show contributor as of 2014. Before starting at the Daily Show, he was offered to audition for SNL but turned it down due to the seven year commitment. 
In 2009, he hosted and starred in his own television show called Important Things With Demetri Martin on Comedy Central. Later in June, it was announced his show had been renewed for a second season. The second season premiered, again on Comedy Central, on February 4, 2010. Martin has stated that Important Things will not return for a third season. Prior to completing work on his second season, Martin starred in the comedy-drama film Taking Woodstock (2009), directed by Ang Lee, which premiered at the 2009 Cannes Film Festival. In the film Martin plays Elliot Tiber, a closeted gay Artist who has given up his ambitions in the city to move upstate and help his old-world Jewish family run their Catskill Mountains motel. The film is based on the book written by Tiber. On April 25, 2011, Martin released his first book, titled This Is a Book. Martin played a small role in the 2011 film Contagion.
According to a July 2011 interview on the podcast WTF with Marc Maron, Martin had a short-lived marriage with a woman named Jen, whom he knew from high school. They began dating after high school, and got married when he was at NYU Law School and she was attending NYU Medical School. This relationship was further analyzed in his one-man show Spiral Bound.
Martin is known for being an unconventional stand-up comic. He uses one-liners and drawings on a "large pad," as well as accompanying his jokes with music on either guitar, harmonica, piano, keyboard, glockenspiel, toy bells, ukulele, or tambourine, sometimes all at once. He has cited Comedian Steven Wright as an important influence (both use deadpan one-liners in their acts) as well as The Far Side Cartoonist, Gary Larson. He has submitted cartoons to the New Yorker magazine at its invitation – and had them rejected. "'You gotta get better at drawing. These aren't funny enough,' Martin told Comedian Marc Maron in 2017.