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The son of a draper, little is known about his early artistic training. After being introduced to Edward Burne-Jones by the critic John Ruskin, he became the painter's first studio assistant in 1866. He subsequently assisted Dante Gabriel Rossetti and G.F. Watts also. In the 1870s he illuminated miniatures and drew cartoons for stained glass for William Morris and his firm, as well as painting decorative panels for the furniture makers Collinson & Lock. From 1873 he worked for Ruskin as a copyist in Italy, where, after his marriage to Angelica Colivicchi in 1875, he settled, first at Siena, then, from 1878, in Florence. They would have six children. From around 1887 Murray lived predominantly in London, where he established a second family, also of six children, with Blanche Richmond. Though Murray continued to paint and exhibit his work throughout the 1880s, he was now mainly active as a collector and dealer, specialising in early Italian (especially Sienese) painting; British and Netherlandish portraiture; Old Master drawings; early Italian maiolica; illuminated MSS; early printed books and the works of the Pre-Raphaelites. He acted as agent for the National Gallery under Sir Frederic Burton and for the South Kensington Museum under Sir Philip Cunliffe Owen. He also acquired pictures for Wilhelm Bode and Jullius Meyer at Berlin, as well as for private collectors in England, Germany and America. He was considered for the post of the Director of the National Gallery in 1894. From the late 1890s Murray advised and had commercial relations with the dealer T. Agnew & Sons. He catalogued the pictures of the Duke of Portland (1894) and parts of his own collection: his books (1899, 1902, 1907) and drawings (1905, 1910, 1912), the majority of which were sold to J. Pierpont Morgan in 1909. Murray's collection was in part dispersed by himself before his death, at sales in Paris (1914) and London (1917) and through numerous donations to collections in Britain, Europe and America. The remainder of his collection would gradually be sold by his English and Italian heirs, starting with important auctions in London (1919-22), New York (1924) and Berlin (1929).

After the Fitzwilliam Museum in Cambridge, the Dulwich Gallery in London (which opened to the public in 1817) is the British collection which most benefited from Murray's generosity in the final years of his life. Between 1911 and 1917 he presented, in strict anonymity, forty-six paintings to the Gallery, most of them "portraits made in England in the 17th and 18th Centuries". He intended that these should form a historical "sequence of British portraiture in these centuries". His pioneering work in this field was recognized after his death by G.H. Collins Baker.

Murray's association with the Fogg Museum dates back to 1902, when its Director was Charles Herbert Moore (1840-1930). In that year Murray donated a number of drawings by Edward Burne-Jones to the Museum, while in 1903 he presented it with a watercolour by Turner in memory of his friend William James Stillman. By now Murray had also met Edward Waldo Forbes (1873-1969), Director from 1909, who had come to England to study at Oxford. Forbes made is first, private purchases from Murray in this period. Some of the paintings were loaned and later given to the Fogg by Forbes. Commercial dealings with Murray continued up until his death in 1919 and they continued after this with Murray's son Giovanni, who was also in contact and dealt with the Associate Director, Paul Sachs (1878-1975). Works from Murray's collection also entered the Fogg via that of Grenville Winthrop (1864-1943).

Photographs had diverse uses for Murray. They played an important role in his artistic work, especially as a portrait painter. They also constituted a powerful tool in the critical and historical investigation of art. Indeed, the comparison of photographs – with the original artworks and with one another – was fundamental to Murray's exchanges with art historians, connoisseurs, collectors and museum officials. And when these also served a commercial purpose the availability of reproductions was even more crucial. For these reasons Murray acquired and commissioned large numbers of photographs of artworks from very early in his career. Though his photographic archive was unfortunately in the main dispersed at his death, a substantial remnant (around 800 prints) was donated to the Fondazione Memofonte by Ferruccio Malandrini in 2014. As is apparent from this collection, a photographer of whom Murray made frequent use in the late 1880s and early 1890s was Henry Dixon (1820-1893) of London, a specialist in fine art photography whose business was continued by his son Thomas James Dixon (1857-1943).