Spike was born Terence Alan Milligan in Ahmed Nagar or Ahmadnagar, India to an Irish-born officer in the British Army. Though he lived most of his life in Britain and served in the British Army, he was declared stateless in 1960, and took Irish citizenship.

Spike Milligan suffered from bipolar disorder for most of his life, having at least ten mental breakdowns. He was a strident campaigner on environmental matters, particularly arguing against unnecessary noise. He served in the Royal Artillery in World War 2 in North Africa and also Italy, where he was hospitalized for shell shock. During most of the 30s and early 40s he performed as a jazz trumpeter but even then he did comedy sketches. After his hospitalisation he played guitar with a jazz/comedy group called The Bill Hall Trio, at first in concert parties for the troops and, after the War, for a short time on stage. While he was with the Central Pool of Artists (a group, in his own words, "of bomb-happy squaddies") he began to write parodies of their mainstream plays, that displayed many of the key elements of what would become The Goon Show.