Born in Tunica, Mississippi, Cotton became interested in music when he first heard Sonny Boy Williamson II on the radio. He left home with his uncle and moved to West Helena, Arkansas, finding Williamson there. For many years Cotton claimed that he told Williamson that he was an orphan and that Williamson took him in and raised him, a story he admitted in recent years is not true. However, Williamson did mentor Cotton during his early years. Williamson left the South to live with his estranged wife in Milwaukee, Wisconsin, leaving his band in Cotton's hands. Cotton was quoted as saying, "He just gave it to me. But I couldn't hold it together 'cause I was too young and crazy in those days an' everybody in the band was grown men, so much older than me."
Cotton played drums early in his career but is famous for his harmonica playing. He began his professional career playing the blues harp in Howlin' Wolf's band in the early 1950s. He made his first recordings as a solo artist for Sun Records in Memphis in 1953. In 1954, he recorded an electric blues single "Cotton Crop Blues", which featured a heavily distorted power chord–driven electric guitar solo by Pat Hare. Cotton began working with the Muddy Waters Band around 1955. He performed songs such as "Got My Mojo Working" and "She's Nineteen Years Old", although he did not play on the original recordings; Little Walter, Waters's long-time harmonica player, played for most of Waters's recording sessions in the 1950s. Cotton's first recording session with Waters took place in June 1957, and he alternated with Little Walter on Waters's recording sessions until the end of the decade.
In 1965 he formed the Jimmy Cotton Blues Quartet, with Otis Spann on piano, to record between gigs with Waters's band. Their performances were captured by producer Samuel Charters on volume two of the Vanguard recording Chicago/The Blues/Today! After leaving Waters's band in 1966, Cotton toured with Janis Joplin while pursuing a solo career. He formed the James Cotton Blues Band in 1967. The band mainly performed its own arrangements of popular blues and R&B from the 1950s and 1960s. Cotton's band included a horn section, like that of Bobby Bland's. After Bland's death, his son told news media that Bland had recently discovered that Cotton was his half-brother.
In the 1970s, Cotton recorded several albums for Buddah Records. He played harmonica on Waters's Grammy Award–winning 1977 album Hard Again, produced by Johnny Winter. In the 1980s he recorded for Alligator Records in Chicago; he rejoined the Alligator roster in 2010. The James Cotton Blues Band received a Grammy nomination in 1984 for Live from Chicago: Mr. Superharp Himself!, on Alligator, and a second for his 1987 album Take Me Back, on Blind Pig Records. He was awarded a Grammy for Best Traditional Blues Album for Deep in the Blues in 1996. Cotton appeared on the cover of the July–August 1987 issue of Living Blues magazine (number 76). He was featured in the same publication's 40th anniversary issue of August–September 2010.
In 2006, Cotton was inducted into the Blues Hall of Fame at a ceremony conducted by the Blues Foundation in Memphis. He has won or shared ten Blues Music Awards. Cotton battled throat cancer in the mid-1990s, but he continued to tour, using singers or his backing band members as vocalists. On March 10, 2008, Cotton and Ben Harper performed at the induction of Little Walter into the Rock and Roll Hall of Fame, playing "Juke" and "My Babe" together; the induction ceremony was broadcast nationwide on VH1 Classic. On August 30, 2010, Cotton was the special guest on Larry Monroe's farewell broadcast of Blue Monday, which he hosted on KUT in Austin, Texas, for nearly 30 years. Cotton's studio album Giant, released by Alligator Records in late September 2010, was nominated for a Grammy Award. His album Cotton Mouth Man, also on Alligator, released on May 7, 2013, was also a Grammy nominee. It includes guest appearances by Gregg Allman, Joe Bonamassa, Ruthie Foster, Delbert McClinton, Warren Haynes, Keb Mo, Chuck Leavell and Colin Linden. Cotton played harmonica on "Matches Don't Burn Memories" on the debut album by the Dr. Izzy Band, Blind & Blues Bound, released in June 2013. In 2014, Cotton won a Blues Music Award for Traditional Male Blues Artist and was also nominated in the category Best Instrumentalist – Harmonica.
Cotton's touring band includes guitarist and vocalist Tom Holland, vocalist Darrell Nulisch, bassist Noel Neal (brother of the blues guitarist and harmonica player Kenny Neal) and drummer Jerry Porter.