Yoshimoto, daughter of Takaaki Yoshimoto, was born in Tokyo on July 24, 1964. Along with having a famous father, poet Takaaki Yoshimoto, Banana's sister, Haruno Yoiko, is a well-known cartoonist in Japan. Growing up in a liberal family, she learned the value of independence from a young age.

She graduated from Nihon University's Art College, majoring in Literature. During that time, she took the pseudonym "Banana" after her love of banana flowers, a name she recognizes as both "cute" and "purposefully androgynous."

Despite her success, Yoshimoto remains a down-to-earth and obscure figure. Whenever she appears in public she eschews make-up and dresses simply. She keeps her personal life guarded, and reveals little about her certified Rolfing practitioner husband, Hiroyoshi Tahata and son (born in 2003). Instead, she talks about her writing. Each day she takes half an hour to write at her computer, and she says, "I tend to feel guilty because I write these stories almost for fun." She keeps an on-line journal for her English speaking fans.

Yoshimoto began her writing career while working as a waitress at a golf-club restaurant in 1987. She names American author Stephen King as one of her first major influences, and drew inspiration especially from his non-horror stories. As her writing progressed, she was further influenced by Truman Capote and Isaac Bashevis Singer.

Her debut novel, Kitchen, was a phenomenal instant success, with over sixty printings in Japan alone. There have been two films made of the story, a Japanese TV movie and a more widely released version produced in Hong Kong by Yim Ho in 1997. She won the 6th Kaien Newcomer Writers Prize in November 1987, the Umitsubame First Novel Prize, and then the 16th Izumi Kyoka Literary Prize in January 1988 for Kitchen.

Another one of her novels, Goodbye Tsugumi, was also made into a movie in 1990, directed by Jun Ichikawa. The novel received mixed reviews.

Critics think that much of her work is superficial and commercial; her fans however, think it perfectly captures what it means to be young and frustrated in modern Japan. Yoshimoto herself identifies her two main themes as "the exhaustion of young people in contemporary Japan" and "the way in which terrible experiences shape a person's life." Her novels can be fun and escapist, but are always touched with traditional Japanese ideology. Her writing can be quite piercing, haunting, poignant, and darkly humorous all at once. Though critics believe her to be "lightweight," Yoshimoto unabashedly states that she aims to win a Nobel Prize for Literature. Despite her seeming confidence, it seems unlikely that she will ever be awarded the prize, however, as it is claimed that several members of the current Nobel committee have shown a dismissive stance towards Yoshimoto's comments.(citation needed)

Her works include 12 novels and seven collections of essays (including Pineapple Pudding and Song From Banana) which have together sold over six million copies worldwide. Her themes include love and friendship, the power of home and family, and the effect of loss on the human spirit.

In 1998, she wrote the foreword to the Italian edition of the book Ryuichi Sakamoto. Conversazioni by musicologist Massimo Milano.

Banana Yoshimoto was awarded the 39th edition Best Newcomer Artists Recommended Prize by the Minister of Education in August 1988 for Kitchen and Utakata/Sankuchuari. In March 1989, Goodbye Tsugumi was awarded the 2nd Yamamoto Shugoro Literary Prize. In 1994 her first long novel, Amrita, was awarded the Murasaki-shikibu Prize.

Outside of Japan, she was awarded prizes in Italy; the Scanno Literary Prize in 1993, the Fendissime Literary Prize in 1996 and the Literary Prize Maschera d' argento in 1999.