A son of the great actor-producer Sir Herbert Beerbohm Tree and his mistress May Pinney, Reed was born in Putney, London, and educated at the King's School, Canterbury. He embarked on an acting career while still in his teens, but soon went into the role of producer/director, and was responsible for Kipps (1941), The Third Man (1949) and Our Man in Havana, becoming a prime essayist of film versions of the novels of Graham Greene.
From 1943 until 1947, he was married to the elegant British film star Diana Wynyard (1943 to 1947). After their divorce, he married, in 1948, the actress Penelope Dudley Ward, the elder daughter of Freda Dudley Ward, who was a mistress of the Prince of Wales, later Edward VIII of Great Britain and Duke of Windsor. They had one son, Max, and a nephew was actor Oliver Reed.
He was knighted in 1953.