Frederick York Powell was born on 4 January 1850 at 43 Woburn Place, Bloomsbury, London, the son of Frederick Powell, a commissariat merchant, and his wife Mary Powell, daughter of Dr James Powell. He was educated at the Manor House School at Hastings, and Rugby School. He matriculated at the University of Oxford in 1868 as an unattached student, the following year joining Christ Church, where he took a first-class degree in law and modern history in 1872. Whilst at Oxford, he was a member of the exclusive Stubbs Society.

He was called to the bar at the Middle Temple in 1874. Subsequently he became a law-lecturer and tutor at Christ Church, Oxford, and Historical Lecturer at Trinity College, Oxford. He was also a fellow of Oriel College, a delegate of the Clarendon Press, and in 1894 he was made Regius Professor of Modern History in 1894 in succession to James Anthony Froude. In June 1901 he received an honorary doctorate (LLD) from the University of Glasgow during celebrations for the university's 450th jubilee.

He married Florence Batten (née Silke)in in 1874 and they had a daughter, Mariella. His wife died in 1888.

In the Dictionary of National Biography he was described as 'In appearance Powell resembled a sea captain. He was broad, burly, and bearded, brusque in manner, with dark hair and eyes, and a deep rich laugh, ‘a big, untidy, generous man’. In the sphere of learning he is chiefly remembered for his services to northern literature, ... and for the general stimulus which he gave to the study of medieval literature in Great Britain, rather than for outstanding or lasting scholarship.'

He died of heart failure on 8 May 1904 at Staverton Grange, Banbury Road, Oxford, and was buried in Wolvercote. At the time of his death he was the President of the Folklore Society and that society's obituary of him read, 'The serious and rapid impairment of our beloved President's health, which was obvious to those who heard his Address in January last, prepared in some measure his friends for his untimely end. Only in some measure, for it seemed a thing incredible that a man of such splendid physique, and of such zest in life in lusty vigour imparts, would not pass to his grave full of years and honours.'

His 'Folklore' obituary also explains the dearth of publications by him [he was quite a prolific writer in his earlier days] with 'Multifarious interests filled and distracted a life into which little of method entered; hence the non-production of any work of high interest and importance. An omnivorous reader, nothing seemed to escape the meshes of his net [and] it was all and ever at the disposal of any inquirer in whom the sincere quest after truth was apparent. In fact, this readiness to impart all he knew was alike his peril and his charm; it took him off any scheme of consecutive work; it made him the idol of the very miscellaneous folk who crowded the Thursday night receptions of the most unconventional and most delightful of Dons .'

A selection of his collection of artefacts were deposited at the Pitt Rivers Museum at the University of Oxford.