Crace was born in St Albans, Hertfordshire, and grew up with his siblings, Richard, Cyril, and Graham in Forty Hill, an area at the far northern point of Greater London, close to Enfield, where Crace attended Enfield Grammar School. He studied for a degree at the Birmingham College of Commerce (now part of Birmingham City University), where he was enrolled as an external student of the University of London. After securing a BA in English Literature in 1968, he travelled overseas with the UK organization Voluntary Services Overseas (VSO), working in Sudan. Two years later he returned to the UK, and worked with the BBC, writing educational programmes. From 1976 to 1987 he worked as a freelance journalist for The Daily Telegraph and other newspapers.

In 1974 he published his first work of prose fiction, Annie, California Plates in The New Review, and in the next 10 years would write a number of short stories and radio plays, including:

• Helter Skelter, Hang Sorrow, Care’ll Kill a Cat, The New Review (December, 1975). Reprinted in Cosmopolitan and included in Stories by new writers, Faber and Faber (1977).
• Refugees, winner of the Socialist Challenge short story competition (judges: John Fowles, Fay Weldon, Terry Eagleton), Socialist Challenge (1977).
• Seven Ages, Quarto (June, 1980), broadcast as Middling by BBC Radio 3.
• The Bird Has Flown, radio play, broadcast on BBC Radio 4, 28 October 1976.
• A Coat of Many Colours, radio play, broadcast on BBC Radio 4, 26 March 1979.

In 1986 Crace published Continent. Continent won the Whitbread First Novel of the Year Award, the David Higham Prize for Fiction, and the Guardian Fiction prize. This work was followed by The Gift of Stones, Arcadia, Signals of Distress, Quarantine, Being Dead and Six. His most recent novel, The Pesthouse, was published in the UK in March 2007.

Despite living in Britain, Crace is more successful in the United States, as evidenced by the award of the National Book Critics Circle Award in 1999.

Crace is a keen amateur birdwatcher. His other major interest is live music at small venues.

Booker Prize for Fiction

• 1997 Quarantine (shortlist)

International IMPAC Dublin Literary Award

• 1999 Being Dead (shortlist)

National Book Critics Circle Fiction Award

• 1999 Being Dead

Whitbread Book Awards

• 1999 Being Dead (Novel - shortlist)
• 1997 Quarantine (Novel)
• 1986 Continent (First Novel)

Winifred Holtby Memorial Prize

• 1995 Signals of Distress

American Academy of Arts and Letters

• 1992 E. M. Forster Award

GAP International Prize for Literature

• 1989 The Gift of Stones

Premio Antico Fattore

• 1988

Guardian Fiction Prize

• 1986 Continent

David Higham Prize for Fiction

• 1986 Continent