Lee Smith was born in 1944 in Grundy, Virginia, a small coal-mining town in the Appalachian Mountains, less than 10 miles from the Kentucky border. The Smith home sat on Main Street, and the Levisa Fork River ran just behind it. Her mother, Gig, was a college graduate who had come to Grundy to teach school. Her father, Ernest, was the long time owner/operator of a Ben Franklin store in Grundy.

Growing up in the Appalachian Mountains of southwestern Virginia, nine-year-old Lee Smith was already writing...and selling, for a nickel apiece...stories about her neighbors in the coal boomtown of Grundy and the nearby isolated "hollers." After spending her last two years of high school at St. Catherine's School in Richmond, Virginia, Smith enrolled at Hollins College in Roanoke. She and fellow student Annie Dillard (the well-known essayist and novelist) became go-go dancers for an all-girl rock band, the Virginia Woolfs. In 1966, her senior year at Hollins, Smith submitted an early draft of a coming-of-age novel to a Book-of-the-Month Club contest and was awarded one of twelve fellowships. Two years later, that novel, The Last Day the Dog Bushes Bloomed (Harper & Row, 1968), became Smith's first published work of fiction.

Since 1968, she has published fifteen novels, as well as four collections of short stories, and has received eight major writing awards.

Following her graduation from Hollins, Smith married James Seay, a poet and teacher, whom she accompanied from university to university as his teaching assignments changed. She kept busy writing reviews for local papers and raising two little boys, but found little time for her own fiction. By 1971, though, she'd completed her second novel, Something in the Wind, which garnered generally favorable reviews. But her next novel, Fancy Strut (1973), was widely praised by critics as a comic masterpiece.

In 1974 Smith and her family moved to Chapel Hill, North Carolina, where she finished Black Mountain Breakdown (1981), a much darker work than her readers had come to expect. Next she turned her attention to short stories, for which she won O. Henry Awards in 1978 and 1980. Smith published her first collection of short stories Cakewalk in 1981. It was also about this time that her marriage broke up, and she accepted a teaching job at North Carolina State University in Raleigh, where she taught for many years. In 1983 her fifth novel, Oral History, became a Book-of-the-Month Club featured selection, exposing Smith for the first time to a wide national audience. In 1985 she published Family Linen and married journalist Hal Crowther, to whom she dedicated the new book.

Since then, Smith has published Fair and Tender Ladies (1988) and Me and My Baby View the Eclipse (1990), her second book of short stories. In 1992 she published The Devil's Dream, a generational saga about a family of country musicians; in 1995 her ninth novel, Saving Grace, and in 1996 the novella The Christmas Letters, her eleventh work of fiction. News of the Spirit, a collection of stories and novellas was published in 1997. She published New York Times Bestseller The Last Girls in 2002. On Agate Hill (2006), is set in the piedmont South during Reconstruction.

Lee Smith currently lives in Hillsborough, North Carolina.