Mohanraj was born in Colombo, Sri Lanka but moved to the United States at the age of two and grew up in New Britain, Connecticut. She attended Miss Porter's School and the University of Chicago and graduated with a degree in English Literature in 1993. She holds an MFA from Mills College (1998) and a PhD of English Literature from the University of Utah (2005). She also attended the Clarion West Writing Workshop in 1997.
Mohanraj has taught at Salt Lake Community College, the University of Utah, and Vermont College. From September 2005 - June 2007, she was a Visiting Professor in the MFA Program at Roosevelt University. From 2007-2008, she was a Visiting Professor at Northwestern University, in the Center for the Writing Arts. She taught at the Clarion Workshop in July 2008. Since 2008, she has worked as a Clinical Assistant Professor in the English Department at the University of Illinois at Chicago (UIC). She has been Assistant Director of Asian and Asian American Studies at UIC since 2009.
Her novel-in-stories, Bodies in Motion, received an honorable mention from the 2007 Asian American Literary Awards, and was named a USA Today Notable Book. In 2006, Mohanraj received an Illinois Arts Council Fellowship in Prose. She was the co-founder and editor-in-chief for Clean Sheets, an online magazine of erotica, from 1998 to 2000. In 2000 she helped found Strange Horizons, where she was the editor-in-chief until 2003. In 2004 she founded the Speculative Literature Foundation, which she still directs, and is a founding member and Executive Director of Desilit, an organization designed to support South Asian and diaspora writers. Mohanraj founded and is Executive Director of the biannual Kriti Festival, a celebration of South Asian and diaspora literature and arts, founded in 2005. She is also something of a sexuality activist; she founded and moderates the Internet Erotica Writers' Workshop, and was a former moderator for soc.sexuality.general.
Mohanraj's writing frequently explores issues of cultural identity. She has noted in interviews that she feels the complexity of such issues in her own life: "When people ask me what my identity is, I could say I'm Sri Lankan-American... I could say I was raised Catholic but now I'm agnostic. I could say I've been called a queer, because although I've been with a man the past 17 years, I'm bisexual."
Mohanraj lives in Oak Park, Illinois, a Chicago suburb, with her partner, Kevin Whyte (a mathematician), and their children, daughter Kaviarasi Whyte (born May 18, 2007), and son Anandan Whyte (born September 24, 2009). She has two younger sisters, Dr. Mirna Mohanraj and Dr. Sharmila Mohanraj. Her parents, Dr. N.A.C. Mohanraj and Jacintha Mohanraj, live in Connecticut. She has stated that they wanted her to have an arranged marriage like theirs, to a Sri-Lanka-born Tamil Catholic boy whom they would choose.