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Born in the village of Dilyalevo, Vologda Governorate Russian Empire as the youngest of 11 children in a peasant family, the largely self-taught Ilyushin left home at an early age. He worked as a factory laborer, ditch-digger at construction sites, and cleaner of gutters at a dye plant in Petrograd. In 1910, he learned that jobs were available at Kolomyazhsky Racetrack as a groundskeeper. The racetrack was also the site of the first All-Russia Festival of Ballooning in autumn of 1910, and Ilyushin assisted in unpacking crates and setting up equipment. He was also able to meet many of Russia's pioneer aviators, and the even awoke his interest in aviation.

However, in 1911 he returned to his native village to work as a carter of a dairy plant. The following year, he worked as a construction worker for the Amur Railway, and in 1913 he was in Tallinn as a worker in a shipyard. With the outbreak of World War I, Ilyushin was conscripted into the Imperial Russian Army, serving with the infantry, and later (as he was literate) as a clerk in the military administration of Vologda. When a request came for seven volunteers to serve in the fledgling Aviation Section, he was quick to volunteer. He worked at first as a mechanic and member of the ground crew. In the summer of 1917, he was qualified as a pilot. However, in March 1918, with the withdrawal of the Provisional Government from the war, he was demobilized and sent back to his native village. He helped supervise the increasing nationalization of factories in the area and in October 1918 joined the Bolshevik party. With the Russian Civil War, Ilyushin was drafted into the Red Army in May 1919 and was an aviation technician of VVS RKKA (Red Army). That autumn, a White Movement Avro 504 biplane made a forced landing near Petrozavodsk. Ilyushin led a team which dismantled it, and sent it to Moscow where it was reverse-engineered into the Soviet U-1 trainer, of which 737 examples were subsequently built.

In the fall of 1921 Ilyushin left military service and entered the Institute of Engineers of the Red Air Fleet (renamed the Zhukovsky Air Force Engineering Academy) in 1922. During his student years, he concentrated on the design of gliders, taking part in numerous competitions. In 1925, one of his designs was sent to a competition in Germany, where it took first prize for flight time. After obtaining a degree in engineering from the in 1926, Ilyushin started designing aircraft at the TsAGI, where he worked with Nikolai Nikolaevich Polikarpov and Andrei Tupolev. By 1931, he was Assistant Chief of the Research and Test Institute at TsAGI, and began maneuvering to form his own independent design bureau. In 1933, Ilyushin became chief of TsKB at Moscow plant named after V.R.Menzhinski which later grew into the Ilyushin OKB in 1935. His Ilyushin Il-2 strike aircraft and Ilyushin Il-4 bomber were used extensively in World War II, with many thousands of aircraft produced.

After the war, Ilyushin concentrated primarily on commercial airliners, such as the Ilyushin Il-18 and Ilyushin Il-62, saw extensive use with Aeroflot and numerous Soviet client states. In 1967, he was given the honorary rank of General-Colonel of Engineering/Technical Service. He also became an Academician of USSR Academy of Science in 1968. He remained the chief designer at the Ilyushin OKB until his retirement due to illness in 1970.

From 1937-1970, Ilyushin also served as a deputy of the Supreme Soviet of the USSR. He died in 1977 in Moscow and was buried in the Novodevichy Cemetery.