Segal was born in Vienna, Austria. Her father was an accountant in a bank, but as a Jew was fired when the Nazis came to power in 1938. Her parents, Ignatz and Franzi Groszmann, sent her to England in 1939 as part of the Kindertransport rescue mission to escape Nazi rule in Austria. While living in a series of foster homes, the ten-year old girl conducted a campaign of such vigorous letter-writing to British authorities that her parents were eventually allowed to join her in England.

Despite the fact that he was a refugee from Nazi persecution, Segal's father was interned in a Scottish camp for Austrian nationals after Britain entered World War II. He died shortly before the war ended. Segal and her mother, who worked as a cook, lived in near poverty in England, but Segal was nonetheless able to attend Bedford College, the women's division of the University of London, where she received a degree in English literature with honors. In 1951, Segal immigrated to the United States after residing for a short while in the Dominican Republic until the U.S. immigration quota allowed her to enter.

Once Lore was living in New York City, she held a variety of jobs...in a shoe factory, as a receptionist, teaching English — while writing stories that she soon began selling to major magazines.

Lore married David Segal in 1961, with whom she had two children. David Segal died nine years later.

Segal and her mother appeared in the film Stories of the Kindertransport, directed by Mark Jonathan Harris, which won the Academy Award for Documentary Feature in 2000. Franzi Groszmann was the last survivor of the parents who gave over their children to the Kindertransport program; she died at age 100 on September 20, 2005 in New York City.

Lore Segal lives in New York City.

In 1964, to great acclaim, she published Other People's Houses, a novel based on her refugee experience as a child, which had been serialized in the New Yorker. It won a Clifton Fadiman Medal in 2007.

From 1968 through 1978, Segal taught writing at Columbia University School of the Arts. She later taught at Princeton University, Bennington College, Sarah Lawrence College, the University of Illinois at Chicago, and Ohio State University.

For her two children, Segal began to write and translate children’s books, including an award-winning collection of Grimm’s fairy tales with illustrator Maurice Sendak.

In 1976 she returned to adult fiction with her novella, Lucinella. In 1985 she published Her First American which won an award from the American Academy and Institute of Arts and Letters. Her most recent book, the 2007 story collection Shakespeare’s Kitchen, was a finalist for the 2008 Pulitzer Prize. Segal was elected a member of the American Academy of Arts and Sciences in 2006.

In 2009, her novella, Lucinella is being re-released as a part of the Melville House Publishing's Art of the Novella series.

Segal’s children’s books include Tell Me a Mitzi, Tell Me a Trudy, All the Way Home, The Story of Old Mrs. Brubeck and How She Looked for Trouble and Where She Found Him, The Story of Mrs. Lovewright and Purrless Her Cat, Morris the Artist, and Why Mole Shouted and Other Stories. Segal is also the translator of The Juniper Tree and Other Tales from Grimm with illustrations by Maurice Sendak.