She was born in Calcutta, India, in 1940, in a wealthy family. She studied in a Bengali medium school for the first few years, and learnt English when she traveled with her family in Europe . After getting her B.A from the University of Calcutta in 1959 and her M.A. in English and Ancient Indian Culture from the University of Baroda in 1961, she came to the United States of America in 1961 to attend the Writers Workshop at University of Iowa and earned her master of fine arts(MFA) in 1963 and Ph.D. in English and Comparative Literature in 1969 from the University of Iowa. She married Canadian student and author from Harvard , Clark Blaise in 1963, immigrated to Canada in the mid-1960s and became a naturalized citizen in 1972. She was teaching English at McGill University in Montreal when she began writing fiction.
Her first novels, The Tiger's Daughter (1971), Wife (1975) and Days and Nights in Calcutta (1977), depict people caught between two worlds. In 1985 she wrote Darkness and in 1987 Sorrow and The Terror. After fourteen years in Canada, she found life as a "dark-skinned, non-European immigrant to Canada" very hard, so she moved with her husband to the United States and took US citizenship. In 1989, Mukherjee won the National Book Critics Circle Award for The Middleman and Other Stories. She is also a winner of the New York Times Notable Book of the Year award . She has taught creative writing at Columbia University, New York University, and and Queens College, and is currently professor of English at the University of California at Berkeley.