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.

The Imaginarium of Doctor Parnassus, directed and co-written by Gilliam, was released in 2009. In January 2007, Gilliam announced that he had been working on a new project with his writing partner Charles McKeown. One day later, the fansite Dreams reported that the new project was titled The Imaginarium of Doctor Parnassus. In October 2007, Dreams confirmed that this would be Gilliam's next project and was slated to star Christopher Plummer and Tom Waits. Production began in December 2007 in London.  On 22 January 2008, production of the film was disrupted following the death of Heath Ledger in New York City. Variety reported that Ledger's involvement had been a "key factor" in the film's financing. Production was suspended indefinitely by 24 January, but in February the actors Johnny Depp, Jude Law, and Colin Farrell signed on to continue Ledger's role, transforming into multiple incarnations of his character in the "magical" world of the film. Thanks to this arrangement the principal photography was completed on 15 April 2008, on schedule. Editing was completed in November 2008. According to the official ParnassusFilm Twitter channel launched on 30 March 2009, the film's post-production FX work finished on 31 March. During the filming, Gilliam was accidentally hit by a bus and suffered a broken back.  The film had successful screenings including a premiere at the 62nd Cannes Film Festival. The UK release for the film was scheduled for 6 June 2009 but was pushed back to 16 October 2009. The USA release was on 25 December 2009. Eventually, this $30 million-budgeted film had grossed more than $60 million in worldwide theatrical release and received two Academy Award nominations.  The film's end credit states that the film is dedicated to the memories of Ledger and William Vince. Depp, Farrell, and Law donated their proceeds from the film to Ledger's daughter.

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