The son of the Rev. Donald Campbell, hewas born at Kilninver, Argyllshire. Thanks to his father he was already a good Latin scholar when he went to Glasgow University in 1811. Finishing his course in 1817, he became a student at the Divinity Hall, where he gained some reputation as a Hebraist. After further training at Edinburgh he was licensed as preacher by the presbytery of Lorne in 1821. In 1825 he was appointed to the parish of Row on the Gareloch. About this time the doctrine of Assurance of Faith powerfully influenced him.
He began to give so much prominence to the universality of the Atonement that his parishioners petitioned the presbytery in 1829. The petition was withdrawn, but a subsequent appeal in March 1830 led to a presbyterial visitation followed by an accusation of heresy. The General Assembly by which the charge was ultimately considered found Campbell guilty of teaching heretical doctrines and deprived him of his living. Declining an invitation to join Edward Irving in the Catholic Apostolic Church, he worked for two years as an evangelist in the Scottish Highlands.
Returning to Glasgow in 1843, he was minister for sixteen years in a large chapel specially built for him, but he never attempted to found a sect. In 1856 he published his famous book on The Nature of the Atonement, which has profoundly influenced all writing on the subject since his time. His aim is to view the Atonement in the light of the Incarnation. The divine mind in Christ is the mind of perfect sonship towards God and perfect brotherhood towards men. By the light of this divine fact the Incarnation is seen to develop itself naturally and necessarily as an atonement; the penal element in the sufferings of Christ is minimized. Subsequent critics have pointed out that Campbell's position was not self-consistent in the place assigned to the penal and expiatory element in the sufferings of Christ, nor adequate in its recognition of the principle that the obedience of Christ perfectly affirms all righteousness and so satisfies the holiness of God. In 1859 his health gave way, and he advised his congregation to join the Barony church, where Norman McLeod was pastor. In 1862 he published Thoughts on Revelation.
In 1868 he received the degree of D.D. from Glasgow University. In 1870 he moved to Roseneath, and there began his Reminiscences and Reflections, an unfinished work published after his death by his son. Campbell was greatly loved and esteemed by a circle of friends, which included Thomas Erskine, Norman McLeod, Alexander Ewing, Frederick Maurice and CJ Vaughan, and he was recognized and honoured as a man whose opinion on theological subjects carried great weight. In 1871 a testimonial and address were presented to him by representatives of most of the religious bodies in Scotland. He was buried in Roseneath churchyard.