Reed was born Robert Oliver Reed in Wimbledon, London, to sports journalist Peter Reed and his wife Marcia (née Andrews). He was the nephew of film director Sir Carol Reed, and grandson of the actor-manager Sir Herbert Beerbohm Tree by his alleged mistress May Pinney Reed. He was alleged to have been a descendant (through an illegitimate step) of Tsar Peter the Great of Russia. Reed attended Ewell Castle School in Surrey.

After time in the British Army, serving in the Royal Army Medical Corps, Reed commenced his thespian career as an extra in films in the late 1950s. He had no acting training or theatrical experience.

Oliver Reed appeared uncredited in an early Norman Wisdom classic, The Square Peg in 1958, and again with Norman Wisdom in another of his classic comedy films, The Bulldog Breed in (1960), where Reed played the leader of a gang of teddy boys roughing up Norman in a cinema. Reed got his first notable roles in Hammer Films' Sword of Sherwood Forest (1960), The Two Faces of Dr. Jekyll (1960), Captain Clegg (1962), Pirates of Blood River (1962), and The Curse of the Werewolf (1961). Reed also starred in Paranoiac, and The Damned. In 1964 he starred in the first of six films directed by Michael Winner, The System, (known as The Girl-Getters in the U.S.). More Hammer Films productions followed, such as The Brigand Of Kandahar (1965). He first collaborated with director Ken Russell in a TV biopic of Claude Debussy in 1965, and later played Dante Gabriel Rossetti in Russell's subsequent TV biopic Dante's Inferno (1967).

In 1966 Reed played a mountain fur trapper, with co-star Rita Tushingham, in an action-adventure film The Trap with a soundtrack by British film composer Ron Goodwin. Reed's presence could be seen in The Shuttered Room (1967), after which came another performance in the film Women in Love (1969), in which he wrestled nude with Alan Bates in front of a log fire. The controversial 1971 film The Devils was followed in the summer of 1975 by the musical film Tommy, based on The Who's 1969 concept album Tommy and starring its lead singer Roger Daltrey: all three films were directed by Ken Russell. Reed made another contribution to the horror genre in 1976, acting alongside Karen Black, Bette Davis, and Burgess Meredith in the Dan Curtis film Burnt Offerings.

In between those films for Russell, Reed played the role of Bill Sikes, alongside Ron Moody, Shani Wallis, Mark Lester, Jack Wild and Harry Secombe in his uncle Carol Reed's 1968 screen version of the hit musical Oliver!. In 1969 Reed played the title role in Michael Winner's WWII action-comedy Hannibal Brooks, alongside an elephant named Lucy.

An anecdote holds that Reed could have been chosen to play James Bond. In 1969, Bond franchise producers Albert R. Broccoli and Harry Saltzman were looking for a replacement for Sean Connery and Reed (who had recently played a resourceful killer in The Assassination Bureau) was mentioned as a possible choice for the role. Whatever the reason, Reed was never to play Bond. After Reed's death, the Guardian Unlimited called the casting decision, "One of the great missed opportunities of post-war British movie history".

Reed starred as Athos the musketeer in three films based on Alexandre Dumas's novels. First in The Three Musketeers (1973), followed by The Four Musketeers (1974), and The Return of the Musketeers (1989). He starred in a similarly historical themed film, Crossed Swords (1977), as Miles Hendon alongside Raquel Welch and a grown up Mark Lester who had worked with Reed in Oliver!. Reed returned to horror as Dr. Hal Raglan in David Cronenberg's 1979 film The Brood.

From the 1980s onwards Reed's films had less success, his more notable roles being General Rodolfo Graziani in the 1981 film Lion of the Desert, which co-starred Anthony Quinn and chronicled the resistance to Italy's occupation of Libya; and in Castaway (1986) as the middle aged Gerald Kingsland, who advertises for a 'wife' to live on a desert island for a year. The 'wife' is played by Amanda Donohoe.

He also starred as Lt-Col Gerard Leachman in the Iraqi historical film Al-Mas' Ala Al-Kubra (aka Clash of Loyalties) in 1982, which dealt with his exploits during the 1920 revolution in Mesopotamia (modern-day Iraq).

By the late 1980s, he was largely appearing in exploitation films produced by the infamous impresario Harry Alan Towers, most of which were filmed in South Africa at the time of apartheid and released straight to video in the US and UK. These included Skeleton Coast (1987), Dragonard (1987) and its filmed-back-to-back sequel Master Of Dragonard Hill, Hold My Hand I'm Dying (1988), House Of Usher (1988), Captive Rage (1988), Gor (1988) and The Revenger (1989).