Townsend was born in Leicester and went to Glen Hills Primary school, where the school secretary was Mrs Claricotes, a name she used for the school secretary in the Adrian Mole books. Her father was a postman and she was the eldest of five sisters. After failing her 11-plus exam, Townsend then went to the secondary modern South Wigston High School. She left school at the age of 15 and worked in a variety of jobs including factory worker and shop assistant. She married a sheet-metal worker and had three children under five by the time she was 22. She joined a writers' group at the Phoenix Theatre, Leicester in her thirties. She has four children: Sean, Daniel, Victoria and Elizabeth.

At the time of writing the first Adrian Mole book, Townsend was living on the Saffron Lane Estate, a stone's-throw away from the house in which playwright Joe Orton was brought up. The Growing Pains of Adrian Mole was reputedly based on her children's experiences at Mary Linwood Comprehensive School in Leicester. Several of the teachers who appear in the book (such as Ms Fossington-Gore and Mr Dock) are based on actual staff who worked at the school in the early 1980s. When the book was televised, it was mostly filmed at a different school nearby. Mary Linwood Comprehensive was closed in 1997.

The first two books in the series appealed to many readers as a realistic and humorous treatment of the inner life of an adolescent boy. They also captured something of the zeitgeist of Britain during the Thatcher period.

Townsend has suffered from diabetes for many years, as a result of which she was registered blind in 2001, and has woven this theme into her work.

On February 25, 2009, Leicester City Council announced that Townsend will be given the Honorary Freedom of Leicester (where she still lives) alongside singer Engelbert Humperdinck and former professional footballer Alan Birchenall.

In September 2009, she received a kidney from her son Sean after a 2 year wait for a donor. Surgery was carried out at Leicester General Hospital and Townsend spoke to reporters about the work of the UK National Kidney Federation. Her son who fears Adrian Mole is partly based on him is said to be "very proprietorial about what he still calls his kidney".

Adrian Mole series

• The Secret Diary of Adrian Mole, Aged 13¾ (1982), her best selling book, and the best-selling new British fiction book of the 1980s.
• The Growing Pains of Adrian Mole (1984)
• The True Confessions of Adrian Albert Mole (1989)
• Adrian Mole From Minor to Major (1991) is an omnibus of the first three, and includes as a bonus the specially written Adrian Mole and the Small Amphibians.
• The Wilderness Years (1993)
• The Cappuccino Years (1999)
• Adrian Mole and the Weapons of Mass Destruction (2004)
• The Lost Diaries of Adrian Mole, 1999—2001 (2008)
• The Prostrate Years (2009)

Other novels

• Rebuilding Coventry (1988)
• The Queen and I (1992), a story about the British royal family living a "normal" life on an urban housing estate following a republican revolution.
• Ghost Children (1997), a non-comedic novel
• Number Ten (2002)
• Queen Camilla (2006)

Plays

• Womberang (Soho Poly — 1979)
• The Ghost of Daniel Lambert (Leicester Haymarket Theatre — 1981) Theatre closed in January 2007
• Dayroom (Croydon Warehouse Theatre — 1981)
• Captain Christmas and the Evil Adults (Phoenix Arts Theatre — 1982) now known as the Phoenix Arts Centre
• Bazaar and Rummage (Royal Court Theatre — 1982)
• Groping for Words (Croydon Warehouse — 1983)
• The Great Celestial Cow (Royal Court Theatre and tour — 1984)
• The Secret Diary of Adrian Mole aged 13 3/4-The Play (Leicester Phoenix — 1984) now know as Phoenix Arts Centre
• Disneyland it Ain't (Royal Court Theatre Upstairs — 1989)
• Ten Tiny Fingers, Nine Tiny Toes (Library Theatre, Manchester — 1989)
• The Queen and I (Vaudeville Theatre — 1994, toured Australia in the summer of 1996 and was entitled The Royals Down Under)

Non-fiction

• Mr Bevan's Dream: Why Britain Needs Its Welfare State (1989)
• The Public Confessions of a Middle-Aged Woman (2001)