She is the daughter of Robert Gorham Davis and Hope Hale Davis. From 1974 to 1978 Davis was married to Paul Auster, with whom she has a son, Daniel Auster. Davis is currently married to artist Alan Cote, with whom she has a son, Theo Cote. She is a professor of creative writing at University at Albany, SUNY.
She has published six collections of short stories, including The Thirteenth Woman and Other Stories (1976) and Break It Down (1986). Her most recent collection was Varieties of Disturbance, published by Farrar, Straus and Giroux in 2007. "The Collected Stories of Lydia Davis", published by Farrar, Straus and Giroux in 2009, contains all her stories to date.
Her stories are acclaimed for their brevity and humour. Many are only one or two sentences. In fact some of her stories are considered poetry or somewhere between philosophy, poetry and short story.
Davis has also translated Proust, Blanchot, Foucault, Michel Leiris, and other French writers.
In October 2003 Davis received a MacArthur Fellowship.
Davis has been described as "the master of a literary form largely of her own invention." Critic Jacob Appel described her as "the obvious successor to the post-modern throne" in the wake of Donald Barthelme's death. Author Carmela Ciuraro has written of Davis's stories: "Anyone hung up on the conventional (and often predictable) beginning-middle-end narrative format may be disappointed by the wild peregrinations found here. Yet these stories are endearing and rich in their own way, and can be counted on without exception to offer the element of surprise."
Vivant Denon's No Tomorrow is one of the masterpieces of eighteenth-century French libertine literature, a book to set beside Laclos's Les Liaisons dangereuses, except that where Laclos's icy novel is one of hellish depravity, Denon's ravishing novella is a paradisal diversion.