Eberhardt was born in Geneva, Switzerland, to an aristocratic Lutheran Baltic German Russian mother, Nathalie Moerder (née Eberhardt), and an Armenian-born father, Alexandre Trophimowsky, anarchist, ex-priest, and convert to Islam. Isabelle's mother had been married to elderly widower General Pavel de Moerder, who held important Imperial positions. After bearing him two sons and a daughter she traveled to Switzerland to convalesce, taking along her stepson and her own children, with their tutor Trophimowsky. Soon after arriving in Geneva she gave birth again, to Isabelle's brother Augustin and four months later came the news that her husband had died of a heart attack. She elected to remain in Switzerland and four years later, Isabelle was born and registered as her "illegitimate" daughter to avoid acknowledging the tutor's paternity. Isabelle's illegitimacy caused her emotional and financial troubles later in life, preventing her inheritance and contributing to her feelings of estrangement from her siblings, who hated her father.

Despite this, Isabelle was well educated, becoming fluent in Arabic and many other languages. From an early age she dressed as a man in order to enjoy the greater freedom this allowed her.

Her first trip to North Africa was with her mother in May, 1897. On this journey they were attempting to set up a new life there, and while doing so they both converted to Islam, fulfilling a long-standing interest. However, her mother died suddenly in Annaba and was buried there under the name of Fatma Mannoubia. Shortly after her mother's death, Isabelle took the side of local Muslims in violent fighting against colonial rule by the French.

Two years later Trophimowsky died of throat cancer in 1899 in Geneva, nursed by Isabelle. Following the suicide of her half-brother, Vladimir, and the marriage of Augustin to a French woman she had nothing in common with (she wrote: "Augustin is once and for all headed for life's beaten tracks"), Isabelle's ties to her former life were all but severed. From then on, as recorded in her journals, Isabelle Eberhardt spent most of the rest of her life in Africa, making northern Algeria her home and exploring the desert. She also spent some time in Tunisia.

Dressed as a man, calling herself Si Mahmoud Essadi, Eberhardt travelled in Arab society, with a freedom she could not otherwise have experienced. She had converted to Islam and regarded it as her true calling in life.

On her travels she made contact with a secret Sufi brotherhood, the Qadiriyya. They were heavily involved in helping the poor and needy while fighting against the injustices of colonial rule. At the beginning of 1901, in Behima, she was attacked by a man with a sabre, in an apparent attempt to assassinate her. Her arm was nearly severed, but she later forgave the man and (successfully) pleaded for his life to be spared. She married Slimane Ehnni, an Algerian soldier, on October 17, 1901, in Marseille.

On October 21, 1904, Eberhardt died in a flash flood in Aïn Séfra, Algeria. After a long separation, her husband had just joined her. She had rented a house for the occasion. This house, constructed of clay, collapsed in the flood. Her husband, Slimane Ehnni, died in 1907.

Eberhardt wrote on her travels in many books and French newspapers, including Nouvelles Algériennes ("Algerian Short Stories") (1905), Dans l'Ombre Chaude de l'Islam ("In the Hot Shade of Islam") (1906), and Les journaliers ("The Day Laborers") (1922). She started working as a war reporter in the South of Oran in 1903.

A novel, Vagabond, translated by Annette Kobak, and Departures: Selected Writings, translated by Karim Hamdy and Laura Rice are available in English. Eberhardt's journals, recovered from the flash flood which killed her and covering the last 4 years of her life, are also available in English ("The Nomad: The Diaries of Isabelle Eberhardt" Interlink Books, 2003). In addition to these works, Paul Bowles has translated some of her work into English. The Oblivion Seekers (City Lights Publishing, 1975) consists of 13 different short pieces translated by Bowles for publication in 1972.