Martel was born in Salamanca, Spain. As an adolescent he attended high school at Trinity College School, a boarding school in Port Hope, Ontario. He grew up in Costa Rica, France, Mexico, and Canada. As an adult, Martel has spent time in Iran, Turkey and India. After studying philosophy at Trent University in Peterborough, Ontario, Martel spent 13 months in India visiting temples, churches, mosques and zoos, and then two years reading religious texts and castaway stories. His first published fictional work, Seven Stories, appeared in 1993.

In 2001, he published Life of Pi, which was awarded the Man Booker Prize in 2002. Life of Pi was later chosen for the 2003 edition of CBC Radio's Canada Reads competition, where it was championed by author Nancy Lee. In addition, its French translation, Histoire de Pi, was included in the French version of the competition, Le combat des livres, in 2004, championed by singer Louise Forestier.

Martel spent a year in Saskatoon, Saskatchewan from September 2003 as the public library's writer-in-residence. He collaborated with Omar Daniel, composer-in-residence at the Royal Conservatory of Music in Toronto, on a piece for piano, string quartet and bass. The composition, You Are Where You Are, is based on text written by Martel, which includes parts of cellphone conversations taken from moments in an ordinary day.

In November 2005, the University of Saskatchewan announced that Martel would be scholar-in-residence. He continues to have an office at the University.

His novel Beatrice and Virgil deals with the Holocaust: its main characters are two talking animals (a monkey and a donkey), who are stuffed animals in a taxidermy shop. Martel describes them as simply two approaches to the same subject. He is also working on a project entitled What is Stephen Harper Reading, where he is sending the Prime Minister of Canada one book every two weeks that portrays "stillness" with an accompanying explanatory note. He is posting his letters, book selections and responses received to a website devoted to the project. A book-length account of the project was published in the fall of 2009.

Martel has stated publicly in a number of interviews that Dante's Divine Comedy is the single most impressive book [he has] ever read. In talking about his most memorable childhood book, he recalls Le Petit Chose by Alphonse Daudet, saying that he read it when he was ten years old, and that it was the first time he found a book so heartbreaking that it moved him to tears.