Ghosh was born in Kolkata and was educated at The Doon School; St. Stephen's College, Delhi; Delhi University; and St Edmund Hall, Oxford, where he was awarded a D.Phil. in social anthropology.

Ghosh lives in New York with his wife, Deborah Baker, author of the Laura Riding biography In Extremis: The Life of Laura Riding (1993) and a senior editor at Little, Brown and Company. They have two children, Lila and Nayan. He has been a Fellow at the Centre for Studies in Social Sciences, Calcutta. In 1999, Ghosh joined the faculty at Queens College, City University of New York as Distinguished Professor in Comparative Literature. He has also been a visiting professor to the English department of Harvard University since 2005. Ghosh has recently purchased a property in Goa and is returning to India. He is working on a trilogy to be published by Penguin Books India.

In 2009 he was elected a Fellow of the Royal Society of Literature

Ghosh's latest work of fiction is Sea of Poppies (2008) an epic saga, set just before the Opium Wars which encapsulates the colonial history of the East. His other novels are The Circle of Reason (1986), The Shadow Lines (1988), The Calcutta Chromosome (1995), The Glass Palace (2000) and The Hungry Tide (2004). The Shadow Lines won the Sahitya Akademi Award, India's most prestigious literary award. The Calcutta Chromosome won the Arthur C. Clarke Award for 1997. Sea of Poppies was shortlisted for the 2008 Booker Prize. Ghosh's fiction is characterised by strong themes that may be somewhat identified with postcolonialism but could be labelled as historical novels. His topics are unique and personal; some of his appeal lies in his ability to weave "Indo-nostalgic" elements into more serious themes.

Ghosh has also written In an Antique Land (1992), Dancing in Cambodia, At Large in Burma (1998), Countdown (1999), and The Imam and the Indian (2002, a large collection of essays on different themes such as fundamentalism, history of the novel, Egyptian culture, and literature). In 2007, he was awarded the Padma Shri by the Indian government.