Born in Montreux, Switzerland, Eaton was the daughter of Canadian Daniel Isaac Vernon Eaton, an army officer from Nova Scotia, and Myra Fitzrandolph of New Brunswick. Eaton was the younger of two daughters. Her father was killed in 1917, while directing the artillery assault at the battle of Vimy Ridge in France.

Educated at the Netherwood School in Rothesay, New Brunswick, Heathfield School in Ascot, England, and at The Sorbonne in Paris, Eaton rejected many of the social conventions of her time and class, giving birth out of wedlock to a daughter while at The Sorbonne. She wrote poetry from an early age, publishing the first, 'The Interpreter', in 1923. Two novels written in 1938 and 1939 received little notice, but in 1940, the publication of 'Quietly My Captain Waits', a novel set in Acadia (now Nova Scotia) in the early days of French settlement (New France), brought her commercial success. She became an American citizen in 1945. A series of novels set in New France followed, as did a teaching appointment at Columbia University from 1949—1951, a Visiting Lecturership at Sweet Briar College, Virginia from 1951—1960, and a position as Writer in Residence with the Huntingdon Hartford Foundation in 1960 and 1962.

As described in 1974 autobiography, 'The Trees and Fields Went the Other Way' Eaton had always felt that she had some Native American or Amerindian heritage, and in the 1950s she began to explore Native American spirituality. A series of short stories published in the New Yorker, four more novels, a volume of poetry, and a Ballet-oratorio would grow out of Eaton's continuing adoption of Native American spiritual practices.

In 1966, the Evelyn Sybil Mary Eaton Collection, a repository for her books, manuscripts, and personal papers, was established in the Mugar Memorial Library at Boston University.