Hofstadter was born in New York, New York, the son of Nobel Prize-winning physicist Robert Hofstadter. He grew up on the campus of Stanford University, where his father was a professor, and he attended the International School of Geneva in 1958-1959. He graduated with Distinction in Mathematics from Stanford University in 1965. He continued his education and received his Ph.D. in Physics from the University of Oregon in 1975.

Hofstadter is College of Arts and Sciences Distinguished Professor of Cognitive Science at Indiana University in Bloomington, where he directs the Center for Research on Concepts and Cognition which consists of himself and his graduate students, forming the "Fluid Analogies Research Group" (FARG). He was initially appointed to the Indiana University's Computer Science Department faculty in 1977, and at that time he launched his research program in computer modeling of mental processes (which at that time he called "artificial intelligence research", a label that he has since dropped in favor of "cognitive science research"). In 1984, he moved to the University of Michigan in Ann Arbor, where he was hired as a professor of psychology and was also appointed to the Walgreen Chair for the Study of Human Understanding. In 1988 he returned to Bloomington as "College of Arts and Sciences Professor" in both Cognitive Science and Computer Science, and also was appointed Adjunct Professor of History and Philosophy of Science, Philosophy, Comparative Literature, and Psychology, but he states that his involvement with most of these departments is nominal. In April, 2009, Hofstadter was elected a Fellow of the American Academy of Arts and Sciences and a Member of the American Philosophical Society.

Hofstadter's many interests include music, visual art, the mind, creativity, consciousness, self-reference, translation and mathematics. Several recursive number-theoretical sequences and concepts in triangle geometry have been named after him.

At the University of Michigan and Indiana University, he co-authored, with Melanie Mitchell, a computational model of "high-level perception" — Copycat — and several other models of analogy-making and cognition, including the Tabletop project, co-developed with Robert French. The Copycat project was subsequently extended under the name "Metacat" by Hofstadter's doctoral student James Marshall. The Letter Spirit project, implemented by Gary McGraw and John Rehling, aims to model the act of artistic creativity by designing stylistically uniform "gridfonts" (typefaces limited to a grid). Other more recent models are Phaeaco (implemented by Harry Foundalis) and SeqSee (Abhijit Mahabal), which model high-level perception and analogy-making in the microdomains of Bongard problems and number sequences, respectively, as well as George (Francisco Lara-Dammer), which models the processes of perception and discovery in triangle geometry.

Hofstadter collects and studies cognitive errors (largely, but not solely, speech errors), "bon mots" (spontaneous humorous quips), and analogies of all sorts, and his long-time observation of these diverse products of cognition, and his theories about the mechanisms that underlie them, have exerted a powerful influence on the architectures of the computational models developed by himself and FARG members.

All FARG computational models share certain key principles, among which are: that human thinking is carried out by thousands of independent small actions in parallel, biased by the concepts that are currently activated; that activation spreads from activated concepts to less activated "neighbor concepts"; that there is a "mental temperature" that regulates the degree of randomness in the parallel activity; that promising avenues tend to be explored more rapidly than unpromising ones. FARG models also have an overarching philosophy that all cognition is built from the making of analogies. The computational architectures that share these precepts are called "active symbols" architectures.

Provoked by predictions of a technological singularity (the hypothetical moment at which artificial intelligence will surpass human intelligence), Hofstadter has both organized and participated in several public discussions of the topic. At Indiana University in 1999 he organized such a symposium, and in April 2000, he organized a larger symposium entitled "Spiritual Robots" at Stanford University, in which he moderated a panel consisting of Ray Kurzweil, Hans Moravec, Kevin Kelly, Ralph Merkle, Bill Joy, Frank Drake, John Holland, John Koza. Hofstadter was also an invited panelist at the first Singularity Summit, held at Stanford in May 2006. Hofstadter expressed doubt about the likelihood of the singularity coming to pass in the foreseeable future.

Hofstadter's thesis about consciousness, first expressed in GEB but also present in several of his later books, is that it is an emergent consequence of seething lower-level activity in the brain. In GEB he draws an analogy between the social organization of a colony of ants and the mind seen as a coherent "colony" of neurons. In particular, Hofstadter claims that our sense of having (or being) an "I" comes from the abstract pattern he terms a "strange loop", which is an abstract cousin of such concrete phenomena as audio and video feedback, and which Hofstadter has defined as "a level-crossing feedback loop". The prototypical example of this abstract notion is the self-referential structure at the core of Gödel's incompleteness theorems. Hofstadter's 2007 book I Am a Strange Loop carries his vision of consciousness considerably further, including the idea that each human "I" is distributed over numerous brains, rather than being limited to precisely one brain.

Hofstadter has said that he feels "uncomfortable with the nerd culture that centers on computers." He admits that "a large fraction [of his audience] seems to be those who are fascinated by technology", but when it was suggested that his work "has inspired many students to begin careers in computing and artificial intelligence" he replied that he was pleased about that, but that he himself has "no interest in computers." In that interview he also mentioned a course he has twice given at Indiana University, in which he took a "skeptical look at a number of highly-touted AI projects and overall approaches". For example, upon the defeat of Kasparov by Deep Blue, he commented that "It was a watershed event, but it doesn't have to do with computers becoming intelligent."

In April 2007, while replying to the following question by Deborah Solomon in Questions for Douglas Hofstadter: "Your entry in Wikipedia says that your work has inspired many students to begin careers in computing and artificial intelligence", he replied, "The entry is filled with inaccuracies, and it kind of depresses me." When asked why he didn't fix it, he replied, "The next day someone will fix it back."