Tiele was born at Leiden. He was educated at Amsterdam, first studying at the Athenaeum Illustre, as the communal high school of the capital was then named, and afterwards at the seminary of the Remonstrant Brotherhood. 
He was destined for the pastorate in his own brotherhood. After steadily declining for a considerable period, this had increased its influence in the second half of the 19th century by widening the tenets of the Dutch Methodists, which had caused many of the liberal clergy among the Lutherans and Calvinists to go over to the Remonstrants. Tiele had liberal religious views himself, which he early enunciated from the pulpit, as Remonstrant pastor of Moordrecht (1853) and at Rotterdam (1856).
Upon the removal of the seminary of the brotherhood from Amsterdam to Leiden in 1873, Tiele was appointed one of its leading professors. In 1877 followed his appointment at the University of Leiden as professor of the history of religions, a chair specially created for him.
With Abraham Kuenen and J. H. Scholten, amongst others, he founded the "Leiden School" of modern theology. From 1867 he assisted Kuenen, A. D. Loman and L. W. Rauwenhoff editing the Theologisch Tijdschrift. In 1889 he became a member of the Teylers Eerste Genootschap. In 1901, he resigned his professorship at Leiden University. He died in January 1902.
Tiele's zeal and power for work were as extraordinary as his vast knowledge of ancient languages, peoples and religions, upon which his researches, according to F. Max Müller, shed a new and vivid light.
Of his many learned works, the Vergelijkende geschiedenis van de egyptische en mesopotamische Godsdiensten (1872), and the Geschiedenis van den Godsdienst (1876; new ed. 1891), have been translated into English, the former by James Ballingall (1878-1882), the latter by Joseph Estlin Carpenter (1877) under the title Outlines of the History of Religion (French translation, 1885; German translation, 1895). A French translation of the Comparative History was published in 1882.
Other works by Tiele are:
Tiele was best known to English students by his Outlines and the Gifford Lectures On the Elements of the Science of Religion, delivered in 1896-1898 at Edinburgh University. They appeared simultaneously in Dutch at Amsterdam, in English in London and Edinburgh (1897-1899, 2 vols).
Tiele was an early proponent of the Dutch school of "science of religion", and proposed that religion is a psychological phenomenon and one of the most profound needs of human beings. Tiele categorized and studied religions as Nature and Ethical religions, a concept that George Galloway contested in 1920 because in practice such a distinction is difficult to draw.
Tiele has also been credited as the founder of the Dutch school of the comparative studies of religions, his influence suggested to be as significant as Max Muller. He was the first professor in The Netherlands to hold a chair in such studies after the Dutch government established this position in 1876. Tiele proposed that religions develop in phases, from being nature religions, to becoming mythological religions, then doctrinal religions, and ultimately as world or universal religions. The last stage holds "holy awe", "looking up to God as the Most High" and "belonging to the adored one forever, in life and in death". In these categories, Tiele in 1877 placed Buddhism, Christianity and Islam as universal religions. Later studies and a better understanding of Buddhism has discredited some of the premises of Tiele's theory. Buddhism, like a few other Indian religions, is essentially a non-theistic religion and it does not suggest its followers to belong to a God in Buddhism or to "look up to God as the Most High".
Edinburgh University in 1900 conferred upon Tiele the degree of D.D. honoris causa, an honor bestowed upon him previously by the universities of Dublin and Bologna. He was also a fellow of at least fifteen learned societies in the Netherlands, Belgium, France, Germany, Italy, Great Britain, and the United States.
Pieter Anton Tiele was his brother.