He was born in Linköping as the son of Thure Theorell and his wife Armida Bill. Theorell went to Secondary School at Katedralskolan in Linköping and passed his examination there on 23 May 1921. In September, he began to study Medicine at the Karolinska Institute and in 1924 he graduated as a Bachelor of Medicine. He then spent three months studying bacteriology at the Pasteur Institute in Paris under Professor Albert Calmette. In 1930 he obtained his M.D. degree with a theory on the lipids of the blood plasma, and was appointed professor in physiological chemistry at the Karolinska Institute.
Theorell, who dedicated his entire career to enzyme research, received the Nobel Prize in Physiology or Medicine in 1955 for discovering the oxidation enzyme and its effects. His contribution also consisted of the theory of the toxic effects of sodium fluoride on the cofactors of crucial human enzymes. He was a former head of research of the Nobel Institute, the first researcher related to the Institute to be awarded a Nobel Prize.
Theorell died in Stockholm and is buried in Norra begravningsplatsen (The Northern Cemetery) alongside his wife, Elin Margit Elisabeth (née Alenius) Theorell, a distinguished Pianist and harpsichordist who died in 2002.