Elizabeth and her two sisters were raised by atheist parents in a household where religion was often debated. They spent their childhood living in various small towns in New Zealand, including Pomare, Wadestown, Waikanae and Paremata. She later published a trilogy of novels that were influenced by her childhood experiences of living near Wellington.Elizabeth had difficulties with writing when she was young because she was slightly dyslexic.

Elizabeth had always enjoyed inventing stories as a child. When she was eleven she created an oral narrative history with her younger sister Sara and its characters and plot evolved based on their input along with the input of their older sister Mary and their friend Carol. When she was sixteen Elizabeth's father overheard a discussion between her, her sisters and Carol regarding the consequences of a secret treaty set in their imaginary world and he remarked that he hoped they were writing this down. Following this they all tried "writing stories about, letters between, and poems by their characters" and Elizabeth enjoyed it so much that she decided she would like to be a writer.

Currently Elizabeth Knox lives in Kelburn, Wellington and is married to Fergus Barrowman, a publisher at Victoria University Press. They have a son Jack Barrowman who is a student at Victoria University.

In 1983, when Elizabeth was 24, she started a degree in English Literature at Victoria University of Wellington. A year later, she started work on After Z-Hour in Bill Manhire’s Original Composition course at Victoria. The novel was inspired by a memory she had of when was eleven and had fallen from a walnut tree on ANZAC Day. She had to be taken to hospital and there she overheard a conversation between an old man and her father about Passchendaele and the life of Salients in 1917. Bill Manhire was encouraging of her novel and told her he would be more interested in seeing her complete that than her degree. After Z-Hour was published in 1987 by Victoria University Press and Elizabeth graduated from Victoria University of Wellington the same year. She was also awarded the ICI Young Writers Bursary award that year.

In 1988 Fergus Barrowman, Nigel Cox, Elizabeth Knox, and Damien Wilkins, with the help of Bill Manhire, Alan Preston and Andrew Mason, co-founded the literary journal Sport. Elizabeth was one of its editors and has also been a frequent contributor to the magazine.

Since 1997 Elizabeth has become a full-time writer. She won the Victoria University of Wellington Writing Scholarship the same year. Her novel The Vintner's Luck was published in 1998. It chronicles the life of a peasant winemaker, Sobran Jodeau, and his relationship with the fallen angel Xas, which begins in 1808 in Burgundy, France, and spans 55 years. The novel was inspired by what she saw in a feverish dream when she had pneumonia. The Vintner's Luck won Elizabeth widespread critical acclaim and numerous awards and it also raised her profile both within New Zealand and beyond.

After The Vintner's Luck Elizabeth published three more novels. Between 2005-2007 Elizabeth's first young adult series, The Dreamhunter Duet, was published. It was described as a "Mansfield-meets-Mahy fantasy" and once again Elizabeth was praised for her audacious imagination and ingeniously constructed tales.

Elizabeth's sister, Sara Knox, had her first novel, The Orphan Gunner, a queer romance set in wartime England, published by Giramondo, Australia in 2007.

In 2009 the movie adaptation of Knox's The Vintner's Luck directed and co-written by Niki Caro was released. The film was almost universally panned at the 34th Annual Toronto International Film Festival. Elizabeth was disappointed at the direction the movie took as she felt Niki Caro "took out what the book was actually about", referring to the romantic relationship between Sobran and Xas which was a core aspect of the novel. Her sister, Sara Knox, who is gay, was also upset about the film version. Elizabeth's bad experience with the film made her pull out of a potential film contract with Forward Films in the UK for her young adult fantasy series, the Dreamhunter Duet.

Elizabeth's most recent work to be published is The Angel's Cut, sequel to The Vintner's Luck, which follows the tale of Xas after the events of the first book and is set in 1930s Hollywood.