Gilliam was born in Minneapolis, Minnesota, the son of Beatrice (nee Vance) and James Hall Gilliam. His father was a travelling salesman for Folgers before becoming a carpenter. Soon after, they moved to nearby Medicine Lake, Minnesota. The family moved to the Los Angeles neighbourhood of Panorama City in 1952.

Gilliam was a part of Monty Python's Flying Circus from its outset, credited at first as an animator (his name was listed separately after the other five in the closing credits) and later as a full member. His cartoons linked the show's sketches together and defined the group's visual language in other media (such as LP and book covers and the title sequences of their films). His animations mix his own art, characterised by soft gradients and odd, bulbous shapes, with backgrounds and moving cutouts from antique photographs, mostly from the Victorian era.  In 1978, Gilliam published Animations of Mortality, an illustrated, tongue-in-cheek, semi-autobiographical how-to guide to his animation techniques and the visual language in them. Roughly 15 years later, between the release of the CD-ROM game Monty Python's Complete Waste of Time in 1994, which used many of Gilliam's animation templates, and the making of Gilliam's film Fear and Loathing in Las Vegas (1998), Gilliam was in negotiations with Enteractive, a software company, to tentatively release in the autumn of 1996 a CD-ROM under the same title as his 1978 book, containing all of his thousands of 1970s animation templates as license-free clip arts for people to create their own flash animations, but the project hovered in limbo for years, probably because Enteractive was about to downsize greatly in mid-1996 and changed its focus from CD-ROM multimedia presentations to internet business solutions and web hosting in 1997 (in the introduction to their 2004 book Terry Gilliam: Interviews, David Sterrit and Lucille Rhodes claimed that the internet had overwhelmed the "computer-communications market" and gave this as the reason that the Animations of Mortality CD-ROM never materialised). Around the time of Gilliam's film The Imaginarium of Doctor Parnassus (2009), the project had changed into the idea of releasing his 1970s animation templates as a license-free download of Adobe After Effects or similar files.  Besides creating the animations, he also appeared in several sketches, though he rarely had main roles and did considerably less acting in the sketches. He did, however, have some notable sketch roles, such as Cardinal Fang of the Spanish Inquisition; the bespectacled commenter who said, "I can't add anything to that!" in the sketch "Election Night Special"; Kevin Garibaldi, the brat on the couch shouting "I want more beans!" in the sketch "Most Awful Family in Britain 1974" (episode 45); the Screaming Queen in a cape and mask in The Visitors; and Percy Bysshe Shelly in Ant Poetry Reading. More frequently, he played parts that no one else wanted to play, generally because they required a lot of makeup or uncomfortable costumes (such as the recurring character of a knight in armour who ended sketches by walking on and hitting one of the other characters over the head with a plucked chicken). He took a number of small roles in the films, including Patsy in Monty Python and the Holy Grail (which he co-directed with Terry Jones; Gilliam was responsible for photography, while Jones guided the actors' performances) and the jailer in Monty Python's Life of Brian. He also designed the covers of most of the Monty Python albums, including Another Monty Python Record, The Monty Python Matching Tie and Handkerchief and Monty Python Live at Drury Lane, and their film soundtrack albums.

What role did Terry play in Monty Python?
animator