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Gallagher was born in Ballyshannon, County Donegal in 1948. His father Daniel was employed by the Irish Electricity Supply Board, who were constructing Cathaleen's Fall hydroelectric power station on the Erne River above the town. The family moved, first to Derry City, where his younger brother Donal was born in 1949. His mother, Monica, and the two boys then moved to Cork, where the brothers were raised.

In 2003, Wheels Within Wheels, a collection of acoustic tracks, was released posthumously by Gallagher's brother Donal Gallagher. Collaborators on this album included Bert Jansch, Martin Carthy, The Dubliners, Spanish flamenco guitarist Juan Martin and Lonnie Donegan.  Many modern day musicians, including The Edge from U2, Slash of Guns N' Roses, Johnny Marr of the Smiths, Davy Knowles, Janick Gers of Iron Maiden, James Dean Bradfield of Manic Street Preachers, Glenn Tipton of Judas Priest, Vivian Campbell of Def Leppard, Gary Moore, Joe Bonamassa, cite Gallagher as an inspiration in their formative musical years.  Brian May, lead guitarist of Queen, relates: "so these couple of kids come up, who's me and my mate, and say 'How do you get your sound Mr. Gallagher?' and he sits and tells us. So I owe Rory Gallagher my sound." In 2010, Gallagher was ranked No. 42 on Gibson.com's List of their Top 50 Guitarists of All Time. Gallagher was also listed on Rolling Stone magazine's list of the 100 Greatest Guitarists of All Time, ranked at 57th place.  In April 2014, at the time of the auction of Gallagher's Patrick Eggle 'JS Berlin Legend' guitar, the BBC noted: "Eric Clapton credited him with 'getting me back into the blues'. The Rolling Stones wanted him to replace Mick Taylor and when Jimi Hendrix was asked how it felt to be the world's greatest guitarist, he is reported to have said: 'I don't know, go ask Rory Gallagher'" (but this may be a variant of an urban legend ).
Rory Gallagher