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Ashrawi was born to Palestinian Christian parents on October 8, 1946 in the West Bank city of Nablus. Her father, Daoud Mikhail, was one of the founders of the Palestine Liberation Organization. Her family later moved to Ramallah, where she attended the Ramallah Friends Girls School. She received her bachelor's and master's degrees in literature in the Department of English at the American University of Beirut. While a graduate student in literature at the American University in Beirut she dated Peter Jennings of ABC News who was then stationed there as ABC's Beirut bureau chief. When the Six-Day War broke out in 1967, Ashrawi as a 22 year-old student in Lebanon, was declared an absentee by Israel and denied re-entry to the West Bank. For the next six years, Ashrawi traveled and completed her education gaining a Ph.D. in Medieval and Comparative Literature from the University of Virginia. Ashrawi was finally allowed to re-join her family in 1973 under the family reunification plan.

On August 8, 1975 she married Emil Ashrawi (born 1951), a Christian Jerusalemite who is now a photographer and a theater director. Together they have two daughters, Amal (born 1977) and Zeina (born 1981).

Ashrawi received an Honorary Doctoral Degree at the American University of Beirut on June 28, 2008 as part of an award ceremony coinciding with the university's 139th commencement. She is a member of the Board of Trustees of the Institute for Palestine Studies.

Ashrawi holds honorary degrees from Earlham College and Smith College.

Ashrawi is a passionate advocate of many human rights and gender issues. She is the recipient of numerous international peace, human rights and democracy awards, such as the Olof Palme Award, the Defender of Democracy Award, the Jane Addams International Women's Leadership Award, the Distinguished Alumna Award of the University of Virginia Women's Center, the Distinguished Lifetime Achievements AUB Alumni Award, and the Mahatma Gandhi International Award for Peace and Reconciliation.

Like her parents, Ashrawi self-identifies as a devout Christian as well as a feminist. Her faith led to criticism of her by Palestinan Islamic fundamentalists, claiming that it keeps her from functioning as a proper spokesperson.

While voluntarily a student but denied re-entry to the occupied West Bank, she became the spokes-person for the General Union of Palestinian Students in Lebanon, helped organize women’s revolutionary groups and served as a guide to foreign reporters visiting refugee camps.

Ashrawi returned to the West Bank under the family reunification plan in 1973 and established the Department of English at Birzeit University. She served as Chair of that department from 1973 to 1978, and again from 1981 through 1984; and from 1986-1990 she served the university as Dean of the Faculty of Arts. She remained a faculty member at Birzeit University until 1995, publishing numerous poems, short stories, papers and articles on Palestinian culture, literature, and politics.

Ashrawi's political activism in the Occupied Palestinian territories began almost as early as her academic career at Birzeit. In 1974, she founded the Birzeit University Legal Aid Committee and Human Rights Action Project. Her political work took a greater leap in 1988 during the First Intifada, when she joined the Intifada Political Committee, serving on its Diplomatic Committee until 1993. From 1991 to 1993 she served as the official spokesperson of the Palestinian Delegation to the Middle East peace process and a member of the Leadership/Guidance Committee and executive committee of the delegation.

From 1993 to 1995, with the signing of the Oslo Accords by Yasser Arafat and Yitzhak Rabin, Palestinian self-rule was established, and Ashrawi headed the Preparatory Committee of the Palestinian Independent Commission for Citizens' Rights in Jerusalem. Ashrawi has also served since 1996 as an elected member of the Palestinian Legislative Council, Jerusalem Governorate.

In 1996 Ashrawi was appointed the Palestinian Authority Minister of Higher Education and Research, but she resigned the post in 1998 in protest against political corruption, specifically Arafat's handling of peace talks.

In 1998, Ashrawi founded MIFTAH -- the Palestinian Initiative for the Promotion of Global Dialogue and Democracy, an initiative which works towards respect for Palestinian human rights, democracy and peace.

In 2003 Ashrawi was awarded the Sydney Peace Prize. Her selection was controversial among some Jewish political organisations, who decried Ashrawi as "an apologist for terrorism" for, among other things, her refusal to condemn the lynching of two Israeli soldiers who made a wrong turn in Ramallah and were caught and killed at a Palestinian Police Station. Activist Antony Loewenstein argued in his book My Israel Question that the Australian media, and various Jewish organizations, defamed and vilified Ashrawi in order to prevent her winning the Peace Prize. Of the controversy, Israeli politician Yael Dayan commented,

The fact is that Israel is also doing some immoral things, and we are doing selected shooting, targeted shooting, and none of that's denounced... And this Hanan Ashrawi... I think she's very courageous, and she contributes quite a lot to the peace process.

In April 2007, Ashrawi visited the Palestine Center in Washington, DC and gave a lecture entitled, "Palestine & Peace: The Challenges Ahead"