Chafer was born in Rock Creek, Ohio, the son of Thomas Franklin Chafer, a Congregational pastor. He graduated from Oberlin College (Ohio) in 1892. In the fall of 1889, following in his father's footsteps, Chafer began a two-year ministry as an assistant pastor in the First Congregational Church of Buffalo. The initial year was an apprenticeship with a view to his formal ordination as a minister in the (Presbyterian) Congregational community, which took place in April 1900.
Chafer engaged in traveling evangelistic endeavors from 1901-1914 during which time he maintained a farm near Northfield, Mass. and participated in the annual Northfield Bible conferences. Through these conferences, Chafer met an array of prominent evangelicals from both sides of the Atlantic, among them G. Campbell Morgan, F. B. Meyer, A. C. Gaebelein, James M. Gray, and W. H. Griffith Thomas. His most important contact was with C. I. Scofield, then pastor of the Trinitarian Congregational Church, Moody's church, in Northfield.
Through his close association with Scofield, Chafer became confirmed in dispensational theology, and in 1913 he assisted Scofield in founding the Philadelphia School of the Bible, where he served as a Bible lecturer from 1914-1922. In 1924, having moved to Dallas to pastor the First Congregational Church. Here, with his friend Griffith Thomas, he co-founded the Evangelical Theological College (now Dallas Theological Seminary). Chafer served as its president and professor of systematic theology until his death.
Chafer received a D.D. from Wheaton (1926), Litt.D., Dallas (1924), and Th.D. from the Aix-en-Provence, France, Protestant Seminary (1946). He wrote prolifically and is most noted for his popular book entitled Grace (1922) and his magnum opus eight volume Systematic Theology (1948).