Jennifer Donnelly was born in 1963 in Port Chester, New York. She spent some of her childhood in Lewis County, New York, just about an hour from Big Moose Lake, the setting of her novel, A Northern Light. Her paternal grandfather immigrated to upstate New York during the Irish potato famine and struggled to support his family by farming. Because of the harsh land and the short growing season, the family was poor, very much as Donnelly imagines the Gokey family in A Northern Light. In these trying circumstances, the family's chief means of entertainment was storytelling. Donnelly recalls her great-grandfather reading voraciously on his deathbed because he had never had time to read while working the land. Her mother, orphaned during World War II, often told stories and read books to her daughter. In an interview with Update magazine, Donnelly attributes her love of stories to her upbringing: "Hearing the older generation sit and talk, you absorb how to do pacing and suspense, and structure, how to hold your listeners rapt, how to deliver a good punch line."

Although she did not grow up believing she would be a writer, Donnelly's adolescent years were full of literary inspiration. In her late teens, she lived in London and spent every available minute in the East End, absorbing the city that would shape her first novel, Tea Rose. In 1986, she graduated from the University of Rochester with degrees in English and European history. Donnelly began writing in her twenties and worked on her first novel for ten years. In the spring of 2001, after a long search for a publisher, the author finally published three of her works in quick succession: a children's picture book, Humble Pie, (2002); her adult novel, Tea Rose (2003); and A Northern Light (2003), a young adult novel that became an overnight sensation.

As of 2005, Donnelly lives in Brooklyn, New York, with her husband, daughter, and two greyhounds.