Dorsey was born in Villa Rica, Georgia. His father was a minister and his mother a piano teacher. He learned to play blues piano as a young man. After studying music formally in Chicago, he became an agent for Paramount Records. He put together a band for Ma Rainey called the "Wild Cats Jazz Band" in 1925.
He started out playing at rent parties with the names Barrelhouse Tom and Texas Tommy, but he was most famous as Georgia Tom. As Georgia Tom, he teamed up with Tampa Red (Hudson Whittaker) with whom he recorded the raunchy 1928 hit record "Tight Like That". In all, he is credited with more than 400 blues and jazz songs.
Personal tragedy led Dorsey to leave secular music behind and began writing and recording what he called gospel music. He was the first to use that term. His first wife, Nettie, who had been Rainey's wardrobe mistress, died in childbirth in 1932 along with his first son. In his grief, he wrote his most famous song, one of the most famous of all gospel songs, "Precious Lord Take My Hand".
Unhappy with the treatment received at the hands of established publishers, Dorsey opened the first black gospel music publishing company, Dorsey House of Music. He also founded his own gospel choir and was a founder and first president of the National Convention of Gospel Choirs and Choruses.
"Precious Lord" has been recorded by Elvis Presley, Mahalia Jackson, Roy Rogers, and Tennessee Ernie Ford, among hundreds of others. It was the favorite gospel song of the Rev. Martin Luther King, Jr and was sung at the rally the night before his assassination. It was also a favorite of President Lyndon B. Johnson, who requested it to be sung at his funeral.
Dorsey wrote "Peace in the Valley" for Mahalia Jackson in 1937, which also became a gospel standard. He was the first African American elected to the Nashville Songwriters International Hall of Fame and also the first in the Gospel Music Association's Living Hall of Fame. His papers are preserved at Fisk University, along with those of W.C. Handy, George Gershwin, and the Fisk Jubilee Singers.
He died in Chicago, Illinois.