Garner was born in Geelong, Victoria, the eldest of six children. She attended Manifold Heights State School, Ocean Grove State School and then The Hermitage in Geelong. She went on to study at the University of Melbourne, residing at Janet Clarke Hall, and graduating with a Bachelor of Arts with majors in English and French.

Between 1966 and 1972 Garner worked as a high-school teacher at various Victorian high schools. During this time, in 1967, she also travelled overseas and met Bill Garner, whom she married in 1968 on their return to Australia. Her only child, the actor, musician and writer Alice Garner, was born in 1969, and her marriage ended in 1971.

In 1972, she was sacked by the Victorian Department of Education for "giving an unscheduled sex-education lesson to her 13-year old students at Fitzroy High School". The case was widely publicised in Melbourne, bringing Garner a degree of notoriety.

Garner married two more times: Jean-Jacques Portail (1980–85) and Australian writer Murray Bail (born 1941). She is no longer married.

In 2003 a portrait of Helen Garner, titled True Stories, painted by Jenny Sages, was a finalist in the Archibald Prize.

Garner came to prominence at a time when Australian writers were relatively few in number, and Australian women writers were themselves something of a novelty. Australian academic and writer, Kerryn Goldsworthy, writes that "From the beginning of her writing career Garner was regarded as, and frequently called, a stylist, a realist, and a feminist".

Her first novel, Monkey Grip (1977), relates the lives of a group of welfare recipients living in student-style accommodation in Melbourne. Years later she stated that she had adapted it directly from her personal diaries. The book was very successful: it won the National Book Council Award in 1978 and was turned into a film in 1982. In fact, Goldsworthy suggests that the success of Monkey Grip may well have helped revive the careers of two older but largely ignored Australian women writers, Jessica Anderson and Thea Astley. Thea Astley wrote of the novel that "I am filled with envy by someone like Helen Garner for instance. I re-read Monkey Grip a while ago and it's even better second time through". Critics have retrospectively applied the term Grunge Lit to describe Monkey Grip, citing its depiction of urban life and social realism as being key aspects of later works in the sub-genre.

In subsequent books, she has continued to adapt her personal experiences. Her later novels are: The Children's Bach (1984) and Cosmo Cosmolino (1992). In 2008 she returned to fiction writing with the publication of The Spare Room, a fictional treatment of caring for a dying cancer patient, based on the illness and death of Garner's friend Jenya Osborne. She has also published several short story collections: Honour & Other People's Children: two stories (1980), Postcards from Surfers (1985) and My Hard Heart: Selected Fictions (1998).

In 1984, Australian academic and critic, Don Anderson, wrote of The Children's Bach: "There are four perfect short novels in the English language. They are, in chronological order, Ford Maddox Ford's The Good Soldier, Scott Fitzgerald's The Great Gatsby, Hemingway's The Sun Also Rises and Helen Garner's The Children's Bach." The Australian composer Andrew Schultz wrote an opera of the same name which premiered in 2008.

Helen Garner said, in 1985, that writing novels was like "trying to make a patchwork quilt look seamless. A novel is made up of scraps of our own lives and bits of other people's, and things we think of in the middle of the night and whole notebooks full of randomly collected details". In an interview in 1999, she said that "My initial reason for writing is that I need to shape things so I can make them bearable or comprehensible to myself. It's my way of making sense of things that I've lived and seen other people live, things that I'm afraid of, or that I long for".