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Kakutani, a Japanese American, was born in New Haven, Connecticut, the only child of noted Yale mathematician Shizuo Kakutani. She received her B.A. in English literature from Yale University in 1976, where she studied under noted author and Yale writing professor John Hersey, among others.. After graduation she initially worked as a reporter for The Washington Post, and then from 1977 to 1979 for Time magazine, where Hersey himself had worked. In 1979, she joined The New York Times as a reporter.

Kakutani has been a highly influential literary critic for The New York Times since 1983. She is best known for her book reviews. Her harsh critiques of some prominent authors have garnered both attention and, on occasion, criticism. She has been known to write reviews in the voice of movie or book characters, including Austin Powers, Holden Caulfield, Elle Woods of Legally Blonde, and Truman Capote's character Holly Golightly.

Salman Rushdie has called her "a weird woman who seems to feel the need to alternately praise and spank." At Little, Brown's release party for Infinite Jest, David Foster Wallace, admittedly "stupefyingly inebriated," claimed that Kakutani was an "inept literary critic whose understanding of literature was Archie-grade at best--and she looks like a Grouper fish" (Review of Contemporary Fiction 12.3, 1996). In a June 2005 interview with Rolling Stone magazine, author Norman Mailer criticized Kakutani as a "one-woman kamikaze" who "disdains white male authors" and deliberately "bring[s] out your review two weeks in advance of publication. She trashes it just to hurt sales and embarrass the author." Mailer also said that New York Times editors were "terrified" of Kakutani, and "can't fire her" because she's "a token," "an Asiatic, a feminist."Jonathan Franzen called her “the stupidest person in New York.” Franzen has also called her an "international embarrassment." Moreover, in recent years, Kakutani's particularly harsh reviews of books by famous authors (for example, John Updike's The Widows of Eastwick) are followed by usually milder or openly positive reviews of the same titles by other Times reviewers.

On July 19, 2007, The New York Times published a pre-release story written by Kakutani about Harry Potter and the Deathly Hallows. An account of the ensuing controversy, including the critical comments of some Harry Potter fans, can be found on the Times Public Editor's blog.

Kakutani was criticized for her alleged overuse of the word limn in her reviews. She was also parodied in the essay "I Am Michiko Kakutani" by one of her former classmates, Colin McEnroe.