Atwell was born in Mile End, London, 4 June 1879, the sixth child of butcher Augustus Atwell and his wife Emily Ann. She was educated privately and at the Coopers' Company School and at the Regent Street school. She studied at Heatherley's and St Martin's School of Art, and but left to develop her own interest in imaginary subjects, disliking the emphasis on still-life drawing and classical subjects.

After she sold work to the Tatler and Bystander, she was taken on by the agents Francis and Mills, leading to a long and consistently successful career. In 1908, she married painter and illustrator Harold Cecil Earnshaw (d. 1937) with whom she had a daughter, Marjorie, and two sons. She died at her home in Fowey, Cornwall, in 1964, after which her business was carried on by her daughter, Marjorie.

Mabel Lucie Attwell's initial career was founded on magazine illustration, which she continued throughout her life, but around 1900 she began receiving commissions for book illustration, notably for W & R Chambers and the Raphael House Library of Gift Books. Her early works were somewhat derivative of the style of artists such as her friend Hilda Cowham, Jessie Willcox Smith, John Hassall, and the Heath Robinson brothers. From 1914 onwards, however, she developed her trademark style of sentimentalized rotund cuddly infants, which became ubiquitous across a wide range of markets: cards, calendars, nursery equipment and pictures, crockery and dolls. In 1921, J.M. Barrie personally requested her to illustrate the gift-book edition of Peter Pan. The Lucie Attwell Annual was published from 1922 to 1974, its continuance ten years after her death being made possible by extensive re-use of images, a practice established in 1920s picture books of her work.