The son of lawyer John Hampden Dougherty and brother of the well-known actor Walter Hampden, Paul Dougherty received some early training in perspective drawing and attended the Brooklyn Polytechnic Institute, from which he graduated in 1896. However, presumably in deference to his father, he then studied law at New York Law School, taking his degree in 1898. Although he was admitted to the New York State bar, he soon abandoned the law in favor of art. Some years later, when Dougherty completed a brief biographical record card for the Academy, he wrote that he had studied in 1897 with Henry Ward Ranger in New York. The instruction he received from Ranger seems to have been Dougherty's only formal training in art.
Dougherty went abroad in 1900 to study the Old Masters paintings in the museums of London, Florence, Venice, Munich, and especially Paris, where he was based for most of his European stay. He executed several small sculptures in Paris. Dougherty appears to have returned to the United States in 1904. His work had first appeared in an Academy annual in 1901, and he continued to be represented every year for almost a decade. For the first several years the paintings he showed were landscapes. But as early 1904, the titles of his contributions demonstrate his turn to what would become his abiding specialty: marine subjects. He first exhibited with the Society of American Artists in 1904, also showing marine images. In 1905 Dougherty spent three months sketching on Monhegan Island, off Maine, developing his skills as a marine painter. In the same year he was elected to membership in the Society of American Artists, and with the merger of the Society and the Academy the following year, Dougherty automatically became an Associate of the Academy.
Although Dougherty began painting still lifes and figure compositions in the early 1920s, his fame and considerable success rested on his marine subjects, almost always unsentimental depictions of high surf crashing on rocks. In Academy annual exhibitions his paintings received the George Inness Gold Medal (1913); the Andrew Carnegie Prize (1915); the Benjamin Altman Prize (1918); and the Edwin Palmer Memorial Prize (1941).
Until 1930 Dougherty was in Europe frequently, maintaining a Paris studio in addition to his New York home. Suffering from arthritis in his later years, he sought drier climates. In 1929 he was in Taos, New Mexico, and in 1931 he moved permanently to Carmel, California.