Marcus Clarke was born in London on 24 April 1846 and was educated at Highgate School. He was the only son of William Hislop Clarke. He emigrated to Australia, where his uncle, James Langton Clarke, was a county court judge. He was at first a clerk in the Bank of Australasia, but showed no business ability, and soon proceeded to learn farming at a station on the Wimmera River, Victoria.
He was already writing stories for the Australian Magazine, when in 1867 he joined the staff of the Melbourne Argus through the introduction of Dr. Robert Lewins. He briefly visited Tasmania in 1870 at the request of the Argus to experience at first hand the settings of articles he was writing on the convict period. Old Stories Retold began to appear in the Australasian from February. The following month his great novel His Natural Life (later called For the Term of His Natural Life) commenced serialisation in the Australasian Journal. He also became secretary (1872) to the trustees of the Melbourne Public Library and later (1876) Sub (assistant) Librarian. He founded in 1868 the Yorick Club, which soon numbered among its members the chief Australian men of letters. The most famous of his books is For the Term of his Natural Life (Melbourne, 1874), a powerful tale of an Australian penal settlement. He also wrote The Peripatetic Philosopher (1869), a series of amusing papers reprinted from The Australasian; Long Odds (London, 1870), a novel; and numerous comedies and pantomimes, the best of, which was Twinkle, Twinkle, Little Star (Theatre Royal, Melbourne; Christmas, 1873). In 1869 he married the actress Marian Dunn with whom he had six children.
For the Term of his Natural Life is a "ripping yarn", which at times relies on unrealistic coincidences. The story follows the fortunes of Rufus Dawes, a young man transported for a murder which he did not commit. The harsh and inhumane treatment meted out to the convicts, some of whom were transported for relatively minor crimes, is clearly conveyed. The conditions experienced by the convicts are graphically described. The novel was based on research by the author as well as a visit to the penal settlement of Port Arthur.
Clarke was an important literary figure in Australia, and was the centre of an important bohemian circle. Among the writers were in contact with him were Victor Daley and George Gordon McCrae.
In spite of his popular success Clarke was constantly involved in pecuniary difficulties, which are said to have hastened his death at Melbourne on 2 August 1881.