Selten was born in Breslau (Wrocław) in Lower Silesia, now in Poland, to a Jewish father, Adolf Selten (blind bookseller; d. 1942), and Protestant mother, Käthe Luther. Reinhard Selten was raised as Protestant.
After a brief family exile in Saxony and Austria, Selten returned to Hesse, Germany after the war and, in high school, read an article in Fortune magazine about game theory by the Business Writer John D. McDonald. He recalled later, he would occupy his "mind with problems of elementary geometry and algebra" while walking back and forth to school during that time. He studied mathematics at Goethe University Frankfurt and obtained his diploma in 1957. He then worked as scientific assistant to Heinz Sauermann until 1967. In 1959, he married with Elisabeth Lang Reiner. They had no children. In 1961, he also received his doctorate in Frankfurt in mathematics with a thesis on the evaluation of n-person games.
Selten was professor emeritus at the University of Bonn, Germany, and held several honorary doctoral degrees. He had been an Esperantist since 1959 and met his wife through the Esperanto movement. He was a member and co-founder of the International Academy of Sciences San Marino.
He was a visiting professor at Berkeley and taught from 1969 to 1972 at the Free University of Berlin and, from 1972 to 1984, at the University of Bielefeld. He then accepted a professorship at the University of Bonn. There he built the BonnEconLab, a laboratory for experimental economic research, on which he has been active even after his retirement.
For his work in game theory, Selten won the 1994 Nobel Memorial Prize in Economic Sciences (shared with John Harsanyi and John Nash). Selten was Germany's first and, at the time of his death, only Nobel winner for economics.
He is also well known for his work in bounded rationality, and can be considered as one of the founding fathers of experimental economics. With Gerd Gigerenzer he edited the book Bounded Rationality: The Adaptive Toolbox (2001). He developed an Example of a game called Selten's Horse because of its extensive form representation. His last work was "Impulse Balance Theory and its Extension by an Additional Criterion".
For the 2009 European Parliament election, he was the top candidate for the German wing of Europe – Democracy – Esperanto.