Iolaus was born to Iphicles, the mortal twin brother of Heracles, and Automedusa, the daughter of Alcathous, the king of Megara. His father Iphicles was the son of Amphitryon, the Theban general who had been driven from Tiryns, and Alcmene, the daughter of the king of Mycenae. While Heracles was the son of Zeus, Iphicles was entirely mortal, and Iolaus inherited his father's human nature without any divine blood. He grew up in Thebes, the city whose walls were built by Amphion, the musician who had charmed stones into place with his lyre, and from childhood he was inseparable from his cousin Heracles, who was older by some accounts or nearly the same age by others. The bond between them was closer than that of most brothers, for Iolaus was the one mortal who never feared Heracles' strength, who never envied his divine parentage, and who chose to stand beside him not out of obligation but out of love.

The defining moment of Iolaus's life came during the second labour of Heracles, when the hero was sent to slay the Lernaean Hydra, the monstrous serpent that haunted the swamps of Lerna in the Argolid, the region around the city of Argos in the Peloponnese. The Hydra had been born to Typhon, the hundred-headed storm giant, and Echidna, the half-woman half-serpent mother of monsters, and it possessed a central head that was immortal and eight lesser heads that grew two replacements whenever one was severed. Heracles attacked the beast with his sword and his club, but each time he struck off a head, two more sprang from the bleeding neck, and the creature grew stronger rather than weaker. Heracles was being overwhelmed by the multiplying heads when Iolaus, who had driven his uncle's chariot to Lerna, seized a burning brand from a nearby fire and applied it to each severed neck the moment Heracles cut it off. The fire cauterised the wound and sealed the neck before new heads could grow, and together they cut down the immortal central head, which Heracles buried beneath a heavy rock on the sacred road between Lerna and Elaeus, the town that stood at the edge of the marsh. The goddess Hera, the queen of the gods who had persecuted Heracles all his life, had sent a giant crab to distract him during the battle, but Iolaus crushed the crab beneath his foot and kept the brand burning. For this act, the Thebans later honoured Iolaus as the indispensable companion without whom even Heracles might have failed.

Iolaus served as Heracles' charioteer throughout the remaining labours and beyond, driving the war-car in battle and standing guard while Heracles slept. He accompanied Heracles on many other adventures and fought beside him in the war against the Dryopians, a tribe in northern Greece who refused to yield to the hero's demands. In one famous episode, Heracles and Iolaus travelled to Troy, the great city in Asia Minor, where Laomedon, the king of Troy, had cheated Poseidon, the god of the sea, and Apollo, the god of music and prophecy, of their wages after they built the city's walls. Heracles sacked Troy and killed Laomedon, and Iolaus was given Hesione, the daughter of Laomedon, as his prize, though some accounts say she was given to Telamon, the hero who would later sail with Jason and the Argonauts. Iolaus also fought in the battle against the sons of Hippocoön, the king of Sparta who had driven Tyndareus, the rightful king of Sparta and father of the famous twins Castor and Pollux, from his throne, and in that battle Iolaus was killed, though other traditions say he survived and died in old age. The stories of his death vary, but all agree that he died fighting beside Heracles or avenging his uncle's honour.

After Heracles had completed his labours and been granted peace, Iolaus joined him in founding the Olympic Games at Olympia, the sanctuary in the western Peloponnese sacred to Zeus. The games were established to commemorate Heracles' victories and to honour the king of the gods, and Iolaus was said to have helped organise the first competitions, running the foot races and managing the chariot contests that would become the centrepiece of the festival. The olive wreath, the prize given to victors, was cut from the sacred tree at Olympia that Heracles himself had planted, and Iolaus helped establish the tradition that the games would be held every four years, a cycle that the Greeks called an Olympiad. In later life, Iolaus grew old and frail, his hair white and his hands trembling, but his loyalty to Heracles never wavered. When Eurystheus, the king of Tiryns who had assigned the twelve labours, persecuted the children of Heracles after the hero's death, Iolaus took up arms despite his age and led the young sons of Heracles into battle. He pursued Eurystheus to the Scironian Rocks, the cliffs on the Isthmus of Corinth, the narrow strip of land connecting the Peloponnese to mainland Greece, and killed him there, avenging the man who had made his life worth living.

In some traditions, Iolaus was buried at Thebes with full heroic honours, and his tomb became a place of pilgrimage where the Thebans made offerings and held athletic contests in his memory. The tomb was still visible centuries later, a mound of earth near the sanctuary of Heracles where the hero's club was also said to be buried. In other traditions, Iolaus was granted a miraculous rejuvenation by the gods. After his death or in his old age, the goddess Hebe, the personification of youth and the new bride of Heracles on Olympus, restored Iolaus to the prime of life. The rejuvenated Iolaus then led a colony of Thebans to Sardinia, the large island in the western Mediterranean, where he founded cities and established the cult of Heracles among the native population. He died there in old age a second time, and the Sardinians honoured him as a founding hero. Whether buried at Thebes or reborn in Sardinia, Iolaus remains the model of the faithful companion, the mortal who stood beside a god and made himself indispensable through courage, loyalty, and quick wit.