Matilde was born in the Greek city of Patras to an Italian father and a Greek mother. Her father had emigrated to Greece for political reasons.

She worked as a schoolmistress in Naples, and later described those years of laborious poverty in the preface to a book of short stories called Leggende Napolitane (1881). She first gained renown as a result of the publishing of her Novelle, in a paper of Rocco de' Zerbi's, and later by her first novel, Fantasia (1883), which definitely established her as a writer full of feeling and analytical subtlety.

She spent the years between 1880 and 1886 in Rome, where she published her next five volumes of short stories and novels, all dealing with ordinary Italian, and especially Roman, life, and distinguished by great accuracy of observation and depth of insight: Cuore infermo (1881), Fior di passione (1883), La conquista di Roma (1885), La Virtù di checchina (1884), and Piccole anime (1883).

With her husband, Edoardo Scarfoglio, she founded Il Corriere di Roma, the first Italian attempt to model a daily journal along the lines of the Parisian press. The paper was short lived, and after its demise Serao established herself in Naples where she edited Il Corriere di Napoli. In 1891 she founded Il Mattino, which became the most important and most widely read daily paper of southern Italy. The stress of a journalistic career in no way limited her literary activity; between 1890 and 1902 she produced Il paese di cuccagna, Il ventre di Napoli, Addio amore, All'erta sentinella, Castigo, La ballerina, Suor Giovanna della Croce, Paese di Gesù, novels in which the character of the people is rendered with sensitive power and sympathetic breadth of spirit. Most of these have been translated into English.

Matilde Serao is in a category of her own. She was a naturalist, but her naturalism should be understood in a much wider sense than that which is generally given to it. She was a naturalist because her books reflect life with the utmost simplicity of means, sometimes with an utter neglect of means, and at the same time she is an idealist through her deep sense of the beauty and nobility which humanity can attain, and to which her writings continually aspire. All her work is truly and profoundly Italian; it is the literature of a great mass of individuals, rather than of one peculiarly accentuated individual; the joy and pain of a whole class rather than the perplexities of a unique case or type pulsates through her pages. Serao's defects are always defects of style; her verbosity often clogs the movement of her narrative and mars the artistic effect of her always animated pages. Like Fogazzaro's, her speech is criticized as being too closely related to the popular speech of her particular region.