Sebold was born in Madison, Wisconsin. She grew up in the suburbs of Philadelphia and graduated from Great Valley High School in Malvern, Pennsylvania in 1980. She then enrolled in Syracuse University. Sebold was finishing her freshman year at Syracuse University when she was raped while walking home through a park off campus. She reported the crime to the police, who remarked that a young woman had once been murdered in the same location. Thus, they told her, she was "lucky."

Sebold returned home to Pennsylvania to live with her family for the summer before beginning her sophomore year at Syracuse.After some months at home Sebold returned to Syracuse to finish her bachelor's degree and to study writing. Months later, while walking down a street near the Syracuse campus, she recognized her rapist and reported him to police; she later testified against him, and he received the maximum sentence.

Following graduation from Syracuse, Sebold went to the University of Houston in Texas for graduate school in which she did not complete her graduate studies, but fell into drugs. Then she moved to Manhattan and lived there for 10 years. She held several jobs as a waitress and tried to pursue her writing career. Alice Sebold Sebold wanted to write her story through poetry, but that, and attempts at writing a novel, did not come to fruition. She used heroin recreationally for two years, though claims she never became addicted. Sebold recounted her substance abuse to students at an Evening of Fiction workshop by saying that, "I did a lot of things that I am not particularly proud of and that I can’t believe that I did."

Sebold left the city and moved to Southern California, where she became a caretaker of an arts colony, earning $386 a month and living in a cabin in the woods without electricity. She would write under a propane lamp. In 1995, Sebold applied to graduate school at University of California, Irvine (UCI).

Alice Sebold's first published book, many years in the making, was a memoir of her rape as an eighteen-year-old college freshman. She later returned to Syracuse University, the scene of the rape, and finished her degree. She studied writing, and wanted to write her story then, but kept failing. "I wrote tons of bad poetry about it and a couple of bad novels about it--lots of bad stuff," Sebold told Dennis McLellan of the Los Angeles Times. She explained to McLellan why the novels were not successful: "I felt the burden of trying to write a story that would encompass all rape victims' stories and that immediately killed the idea of this individual character in the novel. So [the novels] tended to be kind of fuzzy and bland, and I didn't want to make any political missteps."

While at UCI, Sebold began writing Lucky, a memoir of her rape. The police had told Sebold that she was lucky to be alive; not long before Sebold's attack, another young woman had been killed and dismembered in the same tunnel. The story began while writing a ten-page assignment, though Sebold eventually wrote 40 pages for her class.

After Lucky, Sebold published the bestselling novel The Lovely Bones. The book is a novel about a 14-year-old girl who is raped, murdered and dismembered. The main character tells her story from her personalized version of Heaven, looking down as her family tries to cope with her death and her killer escapes the police. While working on The Lovely Bones in 1995, Sebold met her husband Glen David Gold at UCI. He arrived late for one of his classes and couldn't take his hat off, and they began talking. They were married in November 2001.

In an interview conducted by Ann Darby of Publishers Weekly, Sebold said of The Lovely Bones: "I was motivated to write about violence because I believe it's not unusual. I see it as just a part of life, and I think we get in trouble when we separate people who've experienced it from those who haven't. Though it's a horrible experience, it's not as if violence hasn't affected many of us." The novel was adapted into a 2009 film of the same name by Peter Jackson.

Sebold's second novel, The Almost Moon, continued what The New Yorker called "Sebold's fixation on terror." It begins: "When all is said and done, killing my mother came easily."

Sebold edited The Best American Short Stories 2009. The process, she said, required her to read and choose twenty of over 200 short stories she was presented with to put in the book.

Sebold won the American Booksellers Association Book of the Year Award for Adult Fiction in 2003 for The Lovely Bones and the Bram Stoker Award for First Novel in 2002. She was also nominated in the Novel category in that year. Sebold is an alumna of the Ragdale Foundation.