Born in Chester, England, Colley was an undergraduate at Bristol University, and completed her doctorate at the University of Cambridge, where she was supervised by John H. Plumb. After holding Fellowships at Girton and Newnham Colleges, in 1978 she became the first woman Fellow of Christ's College, Cambridge.

In 1982 Colley accepted a post at Yale University, where she was appointed Richard M. Colgate Professor of History in 1992 and where she was also Academic Director of the Lewis Walpole Library. Her third book, Britons: Forging the Nation 1707–1837 (1992), won the Wolfson Prize, and has attracted wide and continuing attention both as a study of the evolution and complexities of British national identities, and as a contribution to understandings of nationalism more broadly. In 1998 Colley was offered a Sterling Professorship, Yale's highest Professorial rank, but declined it in favor of an offer of a Research Chair in England.

That year, she joined the London School of Economics as a Senior Leverhulme Research Professor and as School Professor of History. In 1999, Colley was one of several speakers invited to deliver a Millennium Lecture at 10 Downing Street by the then Prime Minister Tony Blair and his wife Cherie Blair. This talk, "Britishness in the 21st Century" was subsequently widely referenced by The British Council and other national bodies. From 1999 to 2003, Colley served on the board of the British Library and on the Council of the Tate Gallery of British Art.

In 2003, Colley returned to the United States, going to Princeton University as Shelby M. C. Davis 1958 Professor of History. The previous year, she published "Captives:Britain, Empire and the World 1600–1850" , an exploration of the underbelly of British empire in this period through the experiences of individual British and Irish captives in Africa, North America and Asia, and in 2007 she published "The Ordeal of Elizabeth Marsh: A Woman in World History" , which the "New York Times" listed as one of the ten best books of the year.

Colley also writes occasionally for The Guardian and for the "London Review of Books".

Linda Colley married the British historian David Cannadine in 1982.

Colley has received Honorary Degrees from University of Southbank 1998; University of Essex 2004; University of East Anglia 2005; and University of Bristol 2006. Among other major public lectures, she has delivered the Anstey Lectures at the University of Kent 1994; the Trevelyan Lectures at the University of Cambridge and the Wiles Lectures at Queen's University Belfast in 1997; a James Ford Special Lecture and the Bateman Lecture at the University of Oxford in 1998 and 2003; a Raleigh Lecture at the British Academy in 2002; the Chancellor Dunning Trust Lecture at Queen's University in Canada in 2004; a President's Lecture at Princeton University in 2007; and the Gordon B. Hinkley Lecture in British Studies at the University of Utah in 2010. She is a Fellow of the British Academy and a Fellow of the Royal Society of Literature.

• Colley was appointed Commander of the Order of the British Empire (CBE) in the 2009 New Year Honours, in which list her husband was knighted.