Gustaf Tenggren was born in 1896 in Magra parish (now part of Alingsås Municipality, in Västra Götaland County, Sweden. In 1913, he received a scholarship to study painting at Valand, the art school in Gothenburg, Sweden. Tenggren's early schooling and artistic influences were solidly grounded in Scandinavian techniques, motifs and myths; he worked with illustrating in the popular Swedish folklore and fairy tales annual Bland Tomtar och Troll, where he succeeded illustrator John Bauer.

After his first exhibition in 1920, Tenggren left Sweden and moved to Cleveland, Ohio, in the United States where his sister lived, and from there, in 1922, to New York City. By 1923, he was illustrating children's book during the heyday of illustrated books by illustrators such as Arthur Rackham and Kay Nielsen. In 1923, Tenggren's work appeared e.g. in new releases of Tanglewood Tales and A Wonder-Book for Girls and Boys, as well as in The Christ Story for Boys and Girls by Abraham Rihbany.

In the 1920s, while continuing to illustrate a large number of children's books, Tenggren worked consistently in advertising up until the Depression; in 1936, he was hired by Walt Disney Productions, to work as a chief illustrator with Snow White and the Seven Dwarfs. Tenggren was not only a concept artist on this movie, but he did much of the illustrations for the non-animated tie-ins to the film, most notably the serialized version of Snow White which was featured in two successive issues of Good Housekeeping Magazine just prior to the film's release. He later worked with productions such as Bambi and Pinocchio, as well as backgrounds and atmospheres of films such as The Ugly Duckling and The Old Mill.

Although his work for Disney was still in the Rackham fairy-tale illustration style, after he left the studio he never painted that way again. From 1942 to 1962, Tenggren worked for Little Golde Books with illustrations for children's books such as Tawny Scrawny Lion; Little Black Sambo and The Poky Little Puppy, which became the single all-time best-selling hardcover children's book in English; and King Arthur and the Knights of the Round Table, Emma Gelders Sterne's retelling of the Arthurian Legend. During these years, his production increased, as did the marketability of his name with a stream of Tenggren books.

After he moved to the United States in 1920, he never returned to Sweden. Gustaf Tenggren died in 1970 at Dogfish Head in Southport, Maine.