McMurtry was born in Archer City, Texas, 25 miles from Wichita Falls, Texas, the son of Hazel Ruth (née McIver) and William Jefferson McMurtry, who was a rancher. He grew up on a ranch outside Archer City, which is the model for the town of Thalia that appears in much of his fiction. He earned degrees from the University of North Texas (B.A. 1958) and Rice University (M.A. 1960). Martin Staples Shockley, PhD (1908–2003), was one McMurtry's English professors at North Texas.
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