Theiler, the son of a physician from Pretoria in South Africa, was educated at the University of Cape Town; he received his MD in 1922 after attending St. Thomas's Hospital, London, and the London School of Tropical Medicine. The same year he left for America to take up a post at the Harvard Medical School. In 1930 Theiler moved to the Rockefeller Foundation in New York, where he later became director of the Virus Laboratory and where he spent the rest of his career.

When Theiler began at Harvard it was still a matter of controversy whether yellow fever was a viral infection, as Walter Reed had claimed in 1901, or whether it was due to Leptospira icteroides, the bacillus discovered by Hideyo Noguchi in 1919. Theiler's first contribution was to reject the latter claim by showing that L. icteroides is responsible for Weil's disease, an unrelated jaundice.

Little can normally be done in the development of a vaccine without an experimental animal in which the disease can be studied and in which the virus can spread. The breakthrough here came in 1927 when Adrian Stokes found that yellow fever could be induced in Rhesus monkeys from India. Within a year Stokes and Noguchi had both died from yellow fever and did not witness Theiler's next major advance. As monkeys tend to be expensive and difficult to handle, researchers much prefer to work with such animals as mice or guinea pigs. Attempts to infect mice had all failed when Theiler tried injecting the virus directly into their brains. Although the animals failed to develop yellow fever they did die of massive inflammation of the brain (encephalitis). In the course of this work Theiler himself contracted yellow fever but fortunately survived and developed immunity.

Although, he reported in 1930, the virus caused encephalitis when passed from mouse to mouse, if it was once more injected into the monkey it revealed itself still to be functioning and producing yellow fever. Yet there had been one crucial change: the virus had been attenuated and while it did indeed produce yellow fever it did so in a mild form and, equally important, endowed on the monkey immunity from a later attack of the normal lethal variety. All was thus set for Theiler to develop a vaccine against the disease. It was not however until 1937, after the particularly virulent Asibi strain from West Africa had passed through more than a hundred subcultures, that Theiler and his colleague Hugh Smith announced the development of the so-called 17-D vaccine. Between 1940 and 1947 Rockefeller produced more than 28 million doses of the vaccine and finally eliminated yellow fever as a major disease. For this work Theiler received the 1951 Nobel Prize for physiology or medicine.