Jesse James was born in Centerville, Missouri (later renamed Kearney). His father, Robert James, was a slave-owning hemp farmer and Baptist minister from Kentucky who helped found William Jewell College in Liberty, Missouri and later died in California. Robert's widow, Zerelda, married again, first to a wealthy man who soon died, then to a timid doctor named Reuben Samuel, who moved into the James home. In the tumultuous years leading up to the American Civil War, Zerelda and Reuben acquired a total of seven slaves and grew tobacco on their well-appointed farm.

When the Civil War began, Union forces quickly drove organized Confederate units out of Missouri. But the state was badly divided between Unionists and Southern sympathizers (including the James-Samuel family), and local tensions were exacerbated by raids by abolitionist Union troops and simple bandits from Kansas. Jesse's older brother, Frank James, fought with the regular Confederate army until illness forced him to return home. In 1863, Frank joined the Confederate bushwhackers, guerrillas who were battling Union forces in western Missouri, in a savage war marked by atrocities by both sides; the warfare was probably more intense because it was largely waged by Missourians, with Unionist militia pitted against Confederate insurgents, which often pitted neighbors against neighbors. Frank and Jesse's own stepfather, Reuben Samuel, was tortured by local militiamen hunting for Frank's band. Frank eventually linked up with Quantrill's Raiders and took part in the bloody massacre of 200 men and boys in Lawrence, Kansas.

In 1864, the sixteen-year-old Jesse joined him as a "bushwhacker," killing Unionist sympathizers and fighting under such commanders as "Bloody Bill" Anderson and Archie Clement. Jesse and Frank took part in the notorious Centralia Massacre in September 1864, in which 22 unarmed Union soldiers returning home on leave were pulled from a train and executed. In a battle against pursuing Union forces, Jesse was credited with personally shooting down the Federal commander. But the brothers' activities brought hardship on the family when Union authorities banished Reuben and Zerelda Samuel from the state of Missouri in January 1865.

The end of the war left Missouri in shambles, its people bitter and divided. A militant minority, the Radicals, took control of the state government, barring former Confederates from voting or holding public office. Jesse himself was shot by Union cavalrymen a month after the war ended, leaving him badly wounded. During Jesse's recovery, his first cousin Zerelda "Zee" Mimms (she was named after his own mother), nursed him back to health, and he started a nine-year courtship with her. Meanwhile, some of his old guerrilla comrades, led by Archie Clement, refused to return to peaceful life.

In 1866, this group (possibly including Jesse, though he may still have been suffering from his wound) staged the first armed robbery of a bank in peacetime, holding up the Clay County Savings Association in the town of Liberty. The guerrillas staged several more robberies over the next few years, though state authorities (and local lynch mobs) decimated the ranks of the older bushwhackers.

By 1868, Frank and Jesse James had definitively joined their old friends in outlawry, when they joined Cole Younger in robbing a bank in Kentucky. But Jesse did not become famous until December 1869, when he and Frank (most likely) robbed the Daviess County Savings Association in Gallatin, Missouri. The robbery netted little, but Jesse (it appears) shot the cashier, believing him to be Samuel Cox, the militia officer who defeated and killed "Bloody Bill" Anderson during the Civil War. Jesse's self-proclaimed attempt at revenge for the Civil War, and the daring escape he and Frank made through the middle of a posse shortly afterward, put his name in the newspapers for the first time.

The robbery marked Jesse's emergence as the most famous of the former guerrillas-turned-outlaws, and it started an alliance with John Newman Edwards, a Kansas City Times editor who was campaigning to return the old Confederates to power in Missouri. Edwards published Jesse's letters, and made him into a symbol of rebel defiance of Reconstruction through his elaborate editorials and praiseful reporting. Jesse James's own role in creating his rising public profile is debated by historians and biographers, though politics certainly surrounded his outlaw career, and enhanced his notoriety.

Meanwhile, the James brothers, along with Cole Younger and his brothers, Clell Miller, and other former Confederates—now considered the James-Younger Gang—continued a remarkable string of robberies from Iowa to Texas, from Kansas to West Virginia. They robbed banks, stagecoaches, and a fair in Kansas City, often in front of large crowds, even hamming it up for the audience. In 1873, they turned to train robbery, derailing the Rock Island train in Adair, Iowa. Their later train robberies had a lighter touch; in fact, only twice in all of Jesse James's train hold-ups did he rob passengers, as he limited himself to the express safe in the baggage car. Such techniques fostered the Robin Hood image that Edwards was creating in his newspapers.

The express companies turned to the Pinkerton National Detective Agency in 1874 to stop the James-Younger gang. The Chicago-based agency worked primarily against urban professional criminals such as counterfeiters, safe crackers, con men, and sneak-thieves; the former guerrillas, supported by many old Confederates in Missouri, proved to be too much for them. One agent (Joseph Whicher) was dispatched to infiltrate Zerelda Samuel's farm and turned up dead shortly afterward. Two others (Louis J. Lull and John Boyle) were sent after the Youngers; Lull was killed by two of the Youngers in a roadside gunfight on March 17, 1874 (though he killed John Younger before he died). Allan Pinkerton, the Agency's founder and leader, took on the case now as a personal vendetta. Working with old Unionists around Jesse James's family's farm, he staged a raid on the homestead on the night of January 25, 1875. An incendiary device thrown inside by the detectives exploded, killing Jesse's half-brother Archie and wounding his mother Zerelda, forcing the amputation of her lower arm.

The bloody fiasco did more than all of Edwards's columns to turn Jesse James into a sympathetic figure for much of the public. A bill that lavishly praised the James and Younger brothers and offered them amnesty was only narrowly defeated in the state legislature. Former Confederates, now allowed to vote and hold office again, voted a limit on reward offers the governor could make for fugitives (when the only reward offers higher than the new limit previously made had been for the James brothers). But Frank and Jesse, both now married (Jesse to his cousin Zee Mimms), moved to the Nashville area, probably to save their mother from further assaults.

On September 7, 1876, the James-Younger gang attempted their most daring raid to date, on the First National Bank in Northfield, Minnesota. Cole and Bob Younger later stated that they selected the bank because of its connection to two Union generals and Radical Republican politicians: Adelbert Ames, the governor of Mississippi during Reconstruction, and Benjamin Butler, Ames's father-in-law and the stern Union commander in occupied New Orleans. However, the robbery was thwarted when Joseph Lee Heywood refused to open the safe. One of the gang members shot and killed Heywood. The bandits who had entered the bank exited empty-handed, only to find the men standing guard outside, including Cole, Bob, and Jim Younger, all dead or wounded amid a hail of gunfire. Suspicious townsmen had confronted the bandits, ran to get their arms, and opened up from under the cover of windows and the corners of buildings. The gang barely escaped, leaving two of their number and two unarmed townspeople (including Heywood) dead in Northfield. A massive manhunt ensued. The James brothers eventually split from the others, and escaped to Missouri after a long and daring ride. The Youngers and one other bandit, Charlie Pitts, were soon discovered; a brisk gunfight left Pitts dead and the Youngers all prisoners. Except for Frank and Jesse James, the James-Younger Gang was destroyed.

Jesse and Frank returned to the Nashville area, where they went under the names of Thomas Howard and B.J. Woodson, respectively. They tried to live peacefully, as Zee had four children: Jesse Edwards, Mary, and twins who died soon after birth. Frank seemed to settle down, but Jesse remained restless. He recruited a new gang in 1879 and returned to crime, holding up a train at Glendale, Missouri, on October 8, 1879. The robbery began a spree of crimes, including the hold-up of the federal paymaster of a canal project in Muscle Shoals, Alabama, and two more train robberies. But the new gang did not consist of the old, battle-hardened guerrillas; they soon turned against each other or were captured, while Jesse grew paranoid, killing one gang member and frightening away another. The authorities grew suspicious, and by 1881 the brothers were forced to return to Missouri. In December, Jesse rented a house in Saint Joseph, Missouri, not far from where he had been born and raised. Frank, however, decided to move to safer territory, heading east to Virginia.