Fauset was born in Fredericksville, an all-black hamlet in Camden County, New Jersey, also known as Free Haven (now incorporated into the borough of Lawnside, New Jersey). She was the daughter of Anna "Annie" Seamon and Redmon Fauset, a Presbyterian minister. Her mother died when she was still a young girl. Her father remarried Bella Huff (a white woman), and they had three children, including civil rights activist and folklorist Arthur Fauset (1899-1983).

Fauset attended Philadelphia High School for girls, and graduated as the only African American in her class. After high school Fauset graduated from Cornell University in 1905, and is believed to be the second black woman elected to Phi Beta Kappa. She later received her M.A. in French from the University of Pennsylvania. Fauset came to the NAACP's journal, The Crisis, in 1912. From 1919 to 1926 she served as the literary editor of The Crisis under W. E. B. Du Bois. Eventually 58 of her 77 published works first appeared in the journal's pages.She is the author of four novels, There Is Confusion (1924), Plum Bun (1928), The Chinaberry Tree: A Novel of American Life (1931), and Comedy, American Style (1933). She is an honorary member of Delta Sigma Theta.

Fauset worked as a schoolteacher for many years and retired from teaching in 1944. She died in 1961 from heart failure.

Novels

• There Is Confusion (novel, 1924) (about an upper middle class African American family in Pennsylvania, later New York City, and its circle of friends, one of whom passes for white until radicalized by an experience in Arkansas which is described in retrospect; ISBN 1-5555-3066-4)
• A Novel Without a Moral (novel, 1929) (a further study of the passing phenomenon; ISBN 0-8070-0919-9)
• The Chinaberry Tree: A Novel of American Life (novel, 1931) (set in a small New Jersey town; ISBN 1-55553-207-1)
• Comedy, American Style (novel, 1933)