Stephen W. Downey was born 1886 in Laramie, Wyoming. He was the ninth of 12 children and his father died when he was 16. He was educated in a country school and attended the University of Wyoming, though he did not graduate. Stephen and his brother, future US Senator Sheridan Downey, left together for Michigan to attend law school. The brothers supported themselves through surveying work and collecting fossils.

After graduating from law school, Stephen set out for Nevada in 1909 by way of San Francisco. There he heard about a job opportunity in Sacramento with the firm Devlin and Devlin. After advancing in the firm, in 1911 he opened his own, Downey, Pullen & Downey, with John F. Pullen and his brother Sheridan trying criminal cases. That firm eventually became Downey, Brand, Seymour, & Rohwer, which exists to this day as Downey Brand.

Most of his career was spent with the state Water Reclamation Board, which he joined in 1923 as an attorney. Some of his major cases include West Coast Life Insurance Company v. Merced Irrigation District, 114 Fed. 2d 654 and SMUD v. PG&E, 72 Cal. App. 2d 638.

Stephen married his first wife, Edith Constance Jennings, his stenographer and a native of Iowa, in 1913. Together they had two children, Stephen Downey and John "Jack" Downey. While Stephen was stationed in France his first wife died of the flu, leaving Stephen's sister Norma to care for the children until he returned and remarried.

His second wife was Charlotte Persis McIntire, an employee of the state library. Stephen and Charlotte had two daughters: the eldest changed her given name to Wendy, after the character in Peter Pan. Their second daughter was called Tink, also after Peter Pan. All four children attended Stanford. Jack became a lawyer at his father's firm, while his brother Stephen attained the rank of Major General in the army and taught at the Army War College.

Stephen was an avid outdoorsman and horseback rider (until his accident policy was canceled by his insurance company on account of his many injuries). He was a member of the Rotary, Sutter Club, and Grange. In 1957 he had 18 grandchildren.