Born in Minneapolis, Minnesota, Tyler grew up in Raleigh, North Carolina, graduated at age nineteen from Duke University, and completed graduate work in Russian studies at Columbia University in New York City. She worked as a librarian and bibliographer before moving to Maryland. In 1963, Tyler married Iranian psychiatrist and novelist Taghi Mohammad Modarressi, with whom she had two daughters, Tezh and Mitra. Modarressi died in 1997. Tyler resides in Baltimore, Maryland, where most of her novels are set, often crossing decades in a family's life.
Her eleventh novel, Breathing Lessons, received the Pulitzer Prize in 1989. The Accidental Tourist was awarded the National Book Critics Circle Award in 1985 and was a finalist for the Pulitzer Prize in 1986 and was made into a 1988 movie starring William Hurt and Geena Davis. Tyler's ninth novel, Dinner at the Homesick Restaurant, which she considers her best work, was a finalist for both the Pulitzer Prize and the PEN/Faulkner Award in 1983. She has edited three anthologies: The Best American Short Stories 1983, Best of the South, and Best of the South: The Best of the Second Decade.