She was born in Kirribilli Point (today part of Sydney), Australia. When she was three years old the family returned to England where she was raised. Her parents were Henry Herron Beauchamp (1825—1907), merchant, and her mother Elizabeth (Louey) Weiss Lassetter (1836—1919). Arnim had four brothers, a sister and an adopted cousin from New Zealand, Kathleen Beauchamp, who later married John Middleton Murray and wrote under the pen name Katherine Mansfield.

In 1891 Elizabeth married Count Henning August von Arnim-Schlagenthin, a Prussian aristocrat, whom she had met during an Italian tour with her father. They married in London but lived in Berlin and eventually moved to the countryside where, in Nassenheide, Pomerania, the Arnims had their family estate. The couple had five children, four daughters and a son. The children's tutors at Nassenheide included E. M. Forster and Hugh Walpole.

Arnim would later refer to her domineering husband as the "Man of Wrath". Writing was her refuge from what turned out to be an incompatible marriage. Arnim's husband had increasing debts and was eventually sent to prison for fraud. This was when she created her pen name "Elizabeth" and launched her career as a writer by anonymously publishing her semi-autobiographical, brooding yet satirical Elizabeth and her German Garden (1898). It would be such a success as to be reprinted twenty times in its first year. A bitter-sweet memoir and companion to it was The Solitary Summer, (1899) and The Benefactress (1902) was also semi-autobiographical. Other titles dealing with feminist protest and witty observations of life in provincial Germany to follow were The Princess Priscilla's Fortnight (1905) and Fraulein Schmidt and Mr Anstruther. (1907) In 1908 Arnim left Nassenheide to return to London. She was all too aware of the lack of feminine power in a male-dominated world, and did not lack for sympathy of human frailty. She would sign her next twenty or so books simply as written "By the author of Elizabeth and Her German Garden" and later simply "By Elizabeth".

Count von Arnim died in 1910, and in 1916 his widow married John Francis Stanley Russell, 2nd Earl Russell, elder brother of Bertrand Russell. The marriage ended in acrimony, with Elizabeth escaping to the United States and the couple separating in 1919, though they never divorced. In 1920 she embarked on an affair with Alexander Stuart Frere Reeves (1892—1984), a British publisher nearly 30 years her junior; he later married and named his only daughter Elizabeth in her honor.[1] From 1910 until 1913 she had been a mistress of the novelist H.G. Wells.

Elizabeth died in Charleston, South Carolina, in 1941, aged 74.

In 1898 she started her literary career by publishing Elizabeth and Her German Garden, a semi-autobiographical novel about a rural idyll published anonymously and, as it turned out to be highly successful, reprinted 20 times within the first year. Von Arnim wrote another 20 books, which were all published "By the author of Elizabeth and Her German Garden". Enchanted April was adapted into an Academy Award-nominated feature film, directed by Mike Newell, in 1992, and a Tony Award-nominated stage play by Matthew Barber, in 2003. Her book Mr. Skeffington was made into a movie starring Bette Davis and Claude Rains in 1944.