Tweedy was born in Belleville, Illinois, on August 25, 1967, the fourth child of Bob and JoAnn Tweedy (nee Werkmeister). Bob Tweedy (died Aug. 4, 2017) worked at Alton & Southern Railroad in East St. Louis while Jo Ann was a kitchen designer. Tweedy has three siblings: older brother Greg Tweedy (died in 2013), brother Steven Tweedy, and sister Debbie Voll. Tweedy's mother bought Tweedy his first guitar when he was six years old, although he did not begin to play it seriously until he was twelve.

Jeff Tweedy was invited to play at Chicago's Noise Pop festival, and was told that he could collaborate with a musician of his choosing. Tweedy chose Jim O'Rourke based on his fascination with O'Rourke's Bad Timing album. O'Rourke offered to bring drummer Glenn Kotche to the festival, and the trio formed a side project named Loose Fur. The other band members of Wilco had written a number of songs for Yankee Hotel Foxtrot, but Tweedy was unsatisfied with them because he believed that the songs did not sound like the ones he played with Loose Fur. Tweedy became such a fan of Kotche's playing style that he decided to dismiss Ken Coomer from the band in favor of Kotche. Tweedy had strong feelings about how songs should be sequenced, which clashed with Jay Bennett's focus on the songs themselves. Because Bennett was mixing the album, this led to a series of arguments about how the album should sound between songs. Tweedy asked O'Rourke to remix several songs on the album that had been mixed by Bennett, which caused tensions within the band to escalate. The album was completed in June 2001, and Tweedy was insistent that it was in its final form. Tweedy also fired Jay Bennett around this time, believing (according to Jay Bennett) that Wilco should only have one core member. The band maintains that the firing of Jay Bennett was a collective decision. Reprise Record's parent company Time Warner merged with America Online in 2001, and the recording company was asked to cut costs. Howie Klein, the CEO of Reprise Records, considered Wilco to be one of the label's core bands, but was offered a lucrative buy-out by AOL Time Warner. Reprise did not consider the album commercially viable and was not interested in releasing the album. David Kahne (Head of A&R) agreed to release Wilco from Reprise records under the condition that Wilco got to keep all legal entitlements to the Yankee Hotel Foxtrot album. After an article in the Chicago Tribune publicly described these managerial practices, CEO Gary Briggs quit. Shortly after leaving the label, Briggs remarked: Yankee Hotel Foxtrot was originally scheduled to be released on Reprise on September 11, 2001, prior to the band's departure from Reprise. Seven days later, Tweedy decided that he would stream the entirety of Yankee Hotel Foxtrot on Wilco's official website. Over thirty record labels offered to release Yankee Hotel Foxtrot after the departure from Reprise was official. One of the thirty was Warner Brothers affiliate Nonesuch Records, who signed Wilco in November 2001. AOL Time Warner paid Wilco to make the album on Reprise, gave them the record for free, and then bought it back on the Nonesuch label. The album was released on April 23, 2002 to significant critical acclaim, including being named the best album of the year by The Village Voice. The album became the biggest hit of Jeff Tweedy's career and was certified gold by the Recording Industry Association of America for selling over 500,000 copies.

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The album became the biggest hit of Jeff Tweedy's career and was certified gold by the Recording Industry Association of America for selling over 500,000 copies.