The Scottish singer-songwriter Gerry Rafferty, who has died aged 63 after a long illness, wrote the multimillion-selling hit Baker Street, which more than 30 years after its 1978 release still netted him an annual £80,000. At the end of the 1970s he did his best work, a series of richly resonant albums that gave no hint of their creator's inner troubles.

Rafferty was born in Paisley, near Glasgow, an unwanted third son. His father, Joseph, was an Irish-born miner. His mother, Mary Skeffington, whose name would provide a Rafferty song title, dragged young Gerry round the streets on Saturday nights so that they would not be at home when his father came back drunk. They would wait outside, in all weathers, until he had fallen asleep, to avoid a beating. "If it wasn't for you, I'd leave," Mary told Gerry. Joseph died in 1963, when Gerry was 16.

That year, Gerry left St Mirin's academy and worked in a butcher's shop and at the tax office. At weekends, he and a schoolfriend, Joe Egan, played in a local group, the Mavericks. At a dancehall in 1965, Gerry met his future wife, apprentice hairdresser Carla Ventilla. She was 15, from an Italian Clydebank family. They married in 1970, after courting at the bohemian bungalow of the artist and future playwright John "Patrick" Byrne and his wife, Alice. Byrne, also educated at St Mirin's, had long been Gerry's mentor, and had first interested Gerry in playing the guitar. Billy Connolly was also in Clydebank, and after Gerry's song Benjamin Day failed as a Mavericks single, Gerry and Egan quit the group and Gerry joined Connolly's outfit, the Humblebums, a Clydeside folk act.

The Humblebums' first LP, on the folk-oriented label Transatlantic, predated Gerry's involvement, but he and Connolly were the group for the albums The New Humblebums (1969, with cover art by Byrne, a partnership that later spanned the albums of Gerry's heyday) and Open Up the Door (1970). Despite US releases, singles written by Gerry (Shoeshine Boy and Saturday Round About Sunday) and John Peel sessions for the BBC, there was little reaction and tensions grew between these strong personalities. It was Gerry who urged Connolly to go it alone as a comic. He went solo too. Staying with Transatlantic, his characteristically titled first album – Can I Have My Money Back? – began his real career in 1971, establishing him as a singer-songwriter, bringing folk fans with him and promoting his songs.

Yet in 1972, now with a young daughter, Martha, Gerry rejoined Egan to form Stealers Wheel, a soft-rock group. Their eponymous debut album climbed the US charts and included the million-selling Stuck in the Middle With You, memorably resurrected for a key scene in Quentin Tarantino's film Reservoir Dogs (1992). But their A&M record contract tied them to huge touring and album commitments, and imposed musicians upon them. Gerry quit.

He was persuaded back, and he and Egan became the sole group members, using backing musicians in the studio and on tours. A now-forgotten single, Everyone's Agreed That Everything Will Turn Out Fine, preceded the minor hit Star and the 1974 album Ferguslie Park. But Rafferty learned that their royalties had been filched, Egan returned to Scotland, and Stealers Wheel collapsed before the release of the album Right Or Wrong in 1975.

Disentangling Gerry from his contracts took three years, but his second solo career, beginning with City to City, was constructed more cannily. Demos for the album were made in Carla's parents' old house, on a four-track machine. Gerry played every instrument, including lentil-jar percussion. Signed to United Artists, he and Hugh Murphy co-produced the album for £18,000 in 1978. Fuelled by the smash hit single Baker Street, it sold 5m copies and Gerry became a millionaire "overnight".

Refusing to tour America, he played a few British dates and recorded his successful follow-up, Night Owl (1979), which yielded further hits: Days Gone Down, Get It Right Next Time and the title track. These, plus the less popular Snakes and Ladders (1980, recorded in Montserrat), are the gorgeously produced works of Gerry's prime. The voice, redolent of both Lennon's and McCartney's, yet unmistakably his own; the music, a shimmering delta of sound; the songs, romantic yet pushily sardonic – all came to fruition thanks to Gerry's gift of perfect pitch and an obdurate determination to stick to his guns.

These were the years I worked for him. I was his personal manager – employee, not svengali – visiting the record company in LA, accompanying Gerry when he was working, and running the small office we set up for him in Tunbridge Wells, Kent. Sadly, my job was mostly to say "no" to people.

He did not want to have to out-platinum himself: he had money enough, and disliked being recognised. But behind an aggressive front, and a strong awareness of his own musical excellence, was fear. He turned down working with Eric Clapton, McCartney and others, telling Carla "nobody was good enough". In truth, he dared not sit down with superstars without a drink or five. So he sat at home – now 300 acres of Kent farmland and a Queen Anne house in Hampstead, north London – and convinced himself he could work alone with Murphy. Carla said later: "He was just stalling for time. Maybe some new project would suddenly happen, but I knew he'd crossed the line as far as the record business went."

His last successful foray was when, after contributing a vocal to the soundtrack of the film Local Hero (1983), he produced the Proclaimers' 1987 hit Letter from America. Gerry made two more albums that decade – Sleepwalking (1982) and North and South (1988). On a Wing and a Prayer followed in 1992, Over My Head in 1994 and Another World in 2000. They marked a decline in sales and standard.

He had always drunk too much, and now he spiralled into alcoholism, putting on weight, which made him unhappier. "He became dangerous at airports," said Carla, "and he'd scream across restaurant tables at me." In phases of renunciation, he smashed cases of superb wines into a stream on his land. Carla finally left in 1990: "There was no hope. I would never have left him if there'd been a glimmer of a chance of him recovering." She remained a source of dependable help, in contact until the end.

After their divorce, farm and Hampstead home gone, Gerry eventually moved to California, near to Martha, who worked for him. In 2008 Gerry left America, helped from wheelchair to plane by a woman he met in a video store. They rented a house in Ireland, until taxis and doctors refused to attend him. That August, a five-day binge at a five-star London hotel ended when the management had him admitted to hospital. He vanished in the night.

Splashed across the Sun, this story was otherwise ignored until 2009, when the Daily Mail resurrected it. Rafferty, urged to issue a statement, announced that he was "extremely well", living in Tuscany and preparing a new album. He was relatively well, but in Dorset, not Tuscany. He never made another album. For two decades, alcohol had dominated this creative and intelligent man's life.

He is survived by Martha, his granddaughter, Celia, and brother, Jim.

• Gerald Rafferty, musician, born 16 April 1947; died 4 January 2011