Rashid attended Malvern College, England, Government College Lahore, and Fitzwilliam College, Cambridge.

After graduating, Rashid spent ten years in the hills of Baluchistan, western Pakistan attempting to organise an uprising against the Pakistani military dictatorships of Ayub Khan and Yahya Khan. He ended his guerrilla fighting days frustrated and defeated and turned his attentions to writing about his homeland.

He has been the Pakistan, Afghanistan and Central Asia Correspondent for the Daily Telegraph for more than 20 years and a correspondent for Far Eastern Economic Review. He also writes for the Wall Street Journal, The Nation, Daily Times and academic journals. He appears regularly on international TV and radio networks such as CNN and BBC World.

He is a well known and vocal critic of the Bush administration in relation to the Iraq war its alleged neglect of the Taliban issue. Rashid's 2000 book, Militant Islam, Oil and Fundamentalism in Central Asia, was a New York Times bestseller for five weeks, translated into 22 languages, and has sold 1.5 million copies since the September 11, 2001 attacks. The book was used extensively by American analysts in the wake of the 9/11 attacks.

His commentary also appears in the Washington Post's PostGlobal segment.

Rashid lives in Lahore, Pakistan with his wife and two children.

In his 2003 book Jihad - the Rise of Militant Islam in Central Asia, Rashid argues that there are "strong links and cooperation between the rank and file" of Hizb ut-Tahrir and the Islamic Movement of Uzbekistan especially when they are from the same village or town. Jean-François Mayer of the Swiss Federal Department of Foreign Affairs says that the insinuation ‘that the party (Hizb ut-Tahrir) will turn violent and has links with the IMU’ is inaccurate: the comments attributed to a member ‘contradicted the party’s ideas’. Representatives of Hizb ut-Tahrir report that they have repeatedly attempted to contact Ahmed Rashid in order to make their views known, but say they have not succeeded. They are even considering writing a rebuttal of his book.

In Taliban, Rashid claims he coined the term "New Great Game" in a self-described "seminal" magazine article published in 1997, though uses of the term can be found prior to the publication of his article.