Matthew Waterhouse was born in Hertford but brought up in Haywards Heath, West Sussex. The son of a solicitor, he was educated at St. Wilfrids Primary School, West Sussex and Shoreham Grammar School.
Waterhouse was the youngest actor to play a companion and had only appeared in one television drama prior to being cast in the role of Adric alongside fourth Doctor, Tom Baker. He stayed with the series for 11 stories covering the arrival of Fifth Doctor Peter Davison. He was written out in the Cyberman story Earthshock, when his character was killed off.
Waterhouse returned to the sphere of Doctor Who and took part in the audio commentaries for the DVD releases of Earthshock and The Visitation released in 2003 and 2004 respectively. He also provided commentary for The Keeper of Traken, released in 2007 as part of the New Beginnings box set. Though released separately, all commentaries were recorded in the same week, as noted by Waterhouse in his commentary for The Keeper of Traken. More recently, in late 2008, he made an audio commentary, jointly with Peter Davison, Janet Fielding and Sarah Sutton for the DVD releases of Four to Doomsday and Black Orchid. He also talks about his complete tenure on the show in the featurette "The Boy With the Golden Star" dedicated to Adric on the Warriors' Gate DVD.
Waterhouse guested on a number of shows after it was announced that he would be playing Adric. This included Saturday Night At The Mill (BBC Pebble Mill, 1980) and Top of the Pops (BBC, 1980) with Dave Lee Travis. He also guested on Peter Davison's This Is Your Life (Thames TV, 1982) and Children in Need (BBC, 1985) with a range of Doctor Who actors. Waterhouse's only film appearance was in 1984's arthouse sci-fi thriller The Killing Edge, directed by Lindsay Shoentoff. Waterhouse, in a minor role, played a knife man.
In 1996 he made the science fiction pilot drama Ghostlands for MJTV Productions, and played the character Tom, alongside actors Sylvester McCoy and Jacqueline Pearce.
Waterhouse has appeared in a wide range of theatre productions in the UK, and has appeared in the Shakespeare productions A Midsummer Night's Dream (as Puck), Twelfth Night (as Fabian), Macbeth (as Fleance) and Hamlet (as the title role). He also appeared in theatre productions of I Am David, The Lion, the Witch and the Wardrobe, Brighton Beach Memoirs (West Yorkshire Playhouse), Peter Pan (directed by actor Clive Swift) and Torch Song Trilogy.
In 2006, Waterhouse self-published his debut novel, Fates, Flowers: A Comedy of New York (ThisPress). He wrote and appeared in his own one-man show Adventures of Huckleberry Finn (Chipping Norton and UK Tour) which was directed by actor Murray Melvin (Bilis Manger in the Doctor Who spin-off drama Torchwood in 2007).
Waterhouse has lived Connecticut in the United States since July 1998.