She was born in Bryn-y-Bia in Llandudno, Wales, and grew up in a household where Christian Science was rigorously practiced. She reported visions of Atlantis at age four and the developing of psychic abilities during her twentieth year, at which time she suffered a nervous breakdown; after her recovery she found herself drawn to the occult. She joined the Theosophical Society and attended courses in psychology and psychoanalysis at the University of London, and became a lay psychotherapist at the Medico-Psychological Clinic in Brunswick Square.

Her first magical mentor was the Irish occultist and Freemason Theodore Moriarty. In 1919 she was initiated into the London Temple of the Alpha et Omega before transferring to the Stella Matutina order.

From 1919 she began writing a number of novels and short stories that explored various aspects of magic and mysticism, including The Demon Lover, The Winged Bull, The Goat-Foot God, and The Secrets of Dr. Taverner. This latter is a collection of short stories based on her experiences with Theodore Moriarty. Two of her novels, The Sea Priestess and Moon Magic, became influential within the religion of Wicca, especially upon Doreen Valiente.

Of her works on magical subjects, the best remembered of her books are; The Cosmic Doctrine, a summation of her basic teachings on mysticism, Psychic Self-Defense, a manual on how to protect oneself from psychic attacks and The Mystical Qabalah, an introduction to Hermetic Qabalah which was first published in England in 1935, and is regarded by many occultists as one of the best books on magic ever written. Though some of her writings may seem dated to contemporary readers, they have the virtue of lucidity and avoid the deliberate obscurity that characterised many of her forerunners and contemporaries.

Fortune fell out with Moina Mathers, head of the Alpha et Omega, and claimed she was coming under magical attack. In 1922, with Moina's consent, Dion Fortune left the Alpha et Omega and with her husband, Penry Evans formed the Fraternity of the Inner Light as an offshoot of the Alpha et Omega. This brought new members to the Alpha et Omega. Fortune's group was later renamed "The Fraternity of the Inner Light", and was, later still, renamed "The Society of the Inner Light". This society was to be the focus of her work for the rest of her life. The work that is considered her masterpiece by occultists and occult sympathizers

Diana L. Paxson, author, sister-in-law and long-time collaborator of Marion Zimmer Bradley, credits Dion Fortune's work on the mystical aspects of the Arthurian legend as being the inspiration for The Mists of Avalon. She stated in a letter which was included on the Random House author bio page for Zimmer Bradley, that Dion Fortune's Vivian Le Fay Morgan was both the progenitor and descendant of the Morgaine that came to life in the Mists novel.

Dion Fortune participated in the "Magical Battle of Britain", which was an attempt by British occultists to magically aid the war effort and which aimed to forestall the impending German invasion during the darkest days of World War II. Her efforts in regard to this are recorded in a series of letters she wrote at the time. The effort involved in this endeavor is said to have contributed to her death shortly after the war ended. Her Society of the Inner Light continues to function, and has also given rise to other orders, including The London Group, until recently headed by Alan Adams (aka Charles Fielding), and Servants of the Light, headed by Dolores Ashcroft-Nowicki.

She died in 1946 from leukemia in Middlesex, London at age 54.

Fiction:

• The Secrets of Dr. Taverner, 1926
• The Demon Lover, 1927
• The Winged Bull, 1935
• The Goat-Foot God, 1936
• Sea Priestess, 1938
• Moon Magic, 1956

Non-fiction :

• The Esoteric Philosophy of Love and Marriage, 1924
• The Mystical Qabalah, 1935
• The Cosmic Doctrine, 1949
• Applied Magic, 1962
• Psychic Self-Defense, 1971
• Glastonbury: Avalon of the Heart, 1986
• The Circuit of Force (with Gareth Knight)
• The Training and Work of an Initiate (with Gareth Knight)
• An Introduction to Ritual Magic (with Gareth Knight), 1997
• What Is Occultism?, 2001
• Mystical Meditations on the Christian Collects, 2006