Born in Virginia, he was educated in Connecticut and graduated from Transylvania University in Kentucky. From 1813 to 1819 he served on the territorial Legislature of Missouri. He moved to Arkansas in 1820 and then Louisiana.
His father, Moses, had travelled to San Antonio, Texas and gained a grant of land in the Mexican territory of Texas for purposes of settlement of 300 families. On his death in 1821 he willed this grant to his son. With this grant re-authorized by Governor Antonio María Martínez, Stephen Austin advertised the opportunity in New Orleans, Louisiana and in December 1821 the first US colonists crossed into the granted territory, in the state of Coahuila and Texas on the Brazos River.
Initially the Mexican government had been willing to allow the colonists self-government. Following Mexican independence there was an attempt by the new junta instituyente to apply general immigration law to the colony. Austin travelled to San Antonio and managed to persuade Agustín de Iturbide to sign the old Imperial law. Itubide abdicated in March 1823 and the law was annulled but again Austin was able to convince the new congress to allow him to continue immigration under favorable terms and later to level the issue to the individual Mexican states. In March 1825 the state legislature of Texas passed a law matching that passed by Iturbide.
By late 1825, Austin had obtained further contracts to settle an additonal 900 families between 1825 and 1829. He had effective civil and military authority over the settlers, but he was quick to introduce a semblence of American law - the Constitution of Coahuila and Texas was agreed on in November 1827. Despite his hopes Austin was making little money from his endeavours; the colonists were unwilling to pay for his services as empresario and most of the money gained was spent on the processes of government and other public services.
He was active to promote trade and to secure the good favour of the Mexican authorities, aiding them in the suppression of the Fredonian Rebellion of Haden Edwards. However, with the colonists numbering over 11,000 by 1832 they were becoming less conducive to Austin's cautious leadership, and the Mexican government was also becoming less cooperative - concerned with the growth of the colony and the efforts of the US government to buy the state from them. The Mexican government had attempted to stop further US immigration as early as April 1830, but again the skills of Austin had gained an exemption for his colonies.
The application of the immigration control and the introduction of tariff laws had done much to dis-satisfy the colonists, peaking in the Anahuac disturbances. Austin then felt compelled to involve himself in Mexican politics, supporting the upstart Antonio López de Santa Anna. Following the success of Santa Anna the colonists sought a compensatory reward, proclaimed at the Convention of 1832 - resumption of immigration, tariff exemption, separation from Coahuila, and a new state government for Texas. Austin was not in favour of these demands, he considered them ill-timed and tried his hardest to moderate them. When they were repeated and extended at the Convention of 1833, Austin travelled to Mexico City and he did gain certain important reforms, but not a state government. Austin was arrested in January 1834 and charged with insurrection; he was not tried and was finally released, returning to Texas in August 1835. In his absence the colonists had not softened their stance; war began in October at Gonzales. Austin was appointed commissioner to the US by the provisional government.
He stood for election in independent Texas in September 1836 and was defeated. He was made Secretary of State, but soon became ill and died.
There are many places in Texas named after Austin.