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Duncan's parents were the noted photographers Lois Steinmetz and Joseph Janney Steinmetz. She was born in Philadelphia Pennsylvania, but grew up in Sarasota, Florida. Duncan started writing and submitting manuscripts to magazines at the age of ten, and when she was thirteen succeeded in selling her first story.

Duncan attended Duke University from 1952 to 1953 but dropped out, married, and started a family. During this time, she continued to write and publish magazine articles; over the course of her career, she has published more than 300 articles, in magazines such as Ladies' Home Journal, Redbook, McCall's, Good Housekeeping, and Reader's Digest. After her first marriage, which produced three children, ended in divorce, Duncan moved to Albuquerque, New Mexico, to teach journalism at the University of New Mexico, where she also earned a BA in English in 1977. In 1965 she married Don Arquette, and had two more children with him.

Duncan is best known for her novels of suspense for teenagers. Some of her works have been adapted for the screen, the most famous example being the 1997 film I Know What You Did Last Summer, adapted from her novel of the same title. She in interviews has stated her distaste at her young adult novel becoming a horror film.

In 1989 the youngest of Duncan's children, Kaitlyn Arquette, was murdered in Albuquerque, New Mexico. Who Killed My Daughter? relates the facts and conjecture about the still unsolved case. Duncan has said her "dream is to write a sequel to Who Killed My Daughter? to give our family's true life horror story a closure. Of course, for that to be possible, Kait's case must be solved."

The 1971 children's book Hotel for Dogs has been made into a movie, released in 2009, starring Emma Roberts. Duncan herself appears as an extra in the crowd scene.

The following is a partial list of Duncan's works, in chronological order of first publication:

• Love Song for Joyce (1957)
• Debutante Hill (1957)
• A Promise for Joyce (1958)
• The Littlest One in the Family (1959) - picture book
• The Middle Sister (1960)
• Silly Mother (1962) - picture book
• Game of Danger (1962)
• Giving Away Suzanne (1962) - picture book
• Season of the Two-Heart (1965)
• Point of Violence (1966)
• Ransom (1966)
• They Never Came Home (1968)
• Major Andre, Brave Enemy (1968)
• Peggy (1970) - historical novel
• Hotel for Dogs (1971)
• A Gift of Magic (1971)
• I Know What You Did Last Summer (1973)
• When the Bough Breaks (1974)
• Down a Dark Hall (1974)
• Summer of Fear (1976)
• Killing Mr. Griffin (1978)
• How to Write and Sell Your Personal Experiences (1979) - non-fiction
• Daughters of Eve (1979)
• Stranger with My Face (1981)
• My Growth as a Writer (1982) - autobiography
• The Terrible Tales of Happy Days School (1983) - picture book
• From Spring to Spring (1983) - picture book
• The Third Eye (1984)
• Horses of Dreamland (1985) - picture book
• Locked in Time (1985)
• The Twisted Window (1987)
• Wonder Kid Meets the Evil Lunch Snatcher (1988) - children's chapter book
• Songs from Dreamland (1988) - picture book/musical CD (vocals by Duncan's daughter, Robin Arquette Burkin)
• The Birthday Moon (1989) - picture book
• Don't Look Behind You (1989)
• Who Killed My Daughter? (1992) - non-fiction
• The Circus Comes Home (1993) - picture book with photos by Duncan's father, Joseph Steinmetz
• Psychic Connections (1995) - non-fiction
• The Magic of Spider Woman (1996) - picture book
• Night Terrors (1996) - anthology (1996)
• Gallows Hill (1997)
• Trapped! (1998) - anthology
• The Longest Hair in the World (1999) - picture book
• I Walk at Night (2000) - picture book
• On the Edge (2000) - anthology
• Song of the Circus (2002) - picture book
• (Seasons of the Heart) (2007) - poetry
• (A Visit with Lois Duncan) DVD -- (2008)
• News for Dogs (2009) - fiction - sequel to Hotel for Dogs
• Movie for Dogs (2010) - fiction - third book in the "For Dogs" series