Earley studied English at Warren Wilson College and after graduation in 1983, he spent four years as a reporter in North Carolina, first as a general assignment reporter for The Thermal Belt News Journal in Columbus, and then as sports editor and feature writer at The Daily Courier in Forest City. Later he attended the University of Alabama in Tuscaloosa, where he received an MFA in creative writing. He quickly found success writing short stories, first with smaller literary magazines, then with Harper's, which published two of his stories: "Charlotte" in 1992 and "The Prophet From Jupiter" in 1993. The latter story helped Harper's win a National Magazine Award for fiction in 1994.

In 1996, Earley's short stories earned him a place on Granta's list of the "20 Best Young American Novelists", and shortly after that announcement, The New Yorker featured him in an issue that focused on the best new novelists in America. He has twice been included in the annual Best American Short Stories anthology. His writing style has been compared by critics to writers as distant as a young Ernest Hemingway and E. B. White. One of his favorite writers is Willa Cather.

On May 15, 2010 Earley gave a humorous commencement speech at Warren Wilson College. He lives with his wife and daughter in Nashville, Tennessee, where he is the Samuel Milton Fleming Associate Professor of English at Vanderbilt University.