Fairbairn was educated at the University of Edinburgh, the University of Berlin, and at the Evangelical Union Theological Academy in Glasgow. He entered the Congregational church ministry and held pastorates at Bathgate, West Lothian and at Aberdeen.
From 1877 to 1886 he was principal of Airedale College, Bradford, England, a post which he gave up to become the first principal of Mansfield College, University of Oxford. In the transference to the University of Oxford under the name of Spring Hill College, Birmingham, he took a considerable part, and he exercised influence not only over generations of his own students, but also over a large number of undergraduates in the university generally. He was granted the degree of M.A. by a decree of Convocation, and in 1903 received the honorary degree of doctor of literature. He was also given the degrees of doctor of divinity of Edinburgh and Yale, and doctor of laws of Aberdeen. His activities were not limited to his college work. He delivered the Muir lectures at Edinburgh University (1878–1882), the Gifford lectures at Aberdeen (1892–1894), the Lyman Beecher lecturee at Yale (1891–1892), and the Haskell lectures in India (1898–1899). He was a member of the Royal Commission of Secondary Education in 1894–1895, and of the Royal Commission on the Endowments of the Welsh Church in 1906. In 1883 he was chairman of the Congregational Union of England and Wales. He is a prolific writer on theological subjects. He resigned his position at Mansfield College in the spring of 1909.
Among his works are Studies in the Philosophy of Religion and History (1876); Studies in the Life of Christ (1881); Religion in History and in Modern Life (1884; rev. 1893); Christ in Modern Theology (1893); Christ in the Centuries (1893); Catholicism Roman and Anglican (1899); Philosophy of the Christian Religion (1902).