Rafsanjani was born on 25 August 1934 in the village of Bahreman near the city of Rafsanjan in Kerman Province, to a wealthy family of pistachio farmers. He had seven siblings. His father, Mirza Ali Hashemi Behramani, was one of Kerman's famous businessmen and a Pistachio merchant. His mother, Hajie Khanom Mahbibi Hashemi, died at the age of 90 on 21 December 1995. One of his brothers, Mohammad Hashemi is the former Director of IRIB. Rafsanjani did not see himself as a peasant from childhood, according to family members.

From his marriage to Effat Marashi in 1958, Rafsanjani had three sons: Mohsen, Mehdi, and Yasser, as well as two daughters, Fatemeh and Faezeh. Only Faezeh Hashemi chose a political life, which led to her becoming a Majlis representative and then the publisher of the weekly newspaper Zan (meaning Woman in English), which was closed in February 1999. In 2016, his daughter, Faezeh Hashemi, sparked a debate on religious persecution in Iran by visiting the female leader of the persecuted Bahai religious minority. The two women had met in prison, when Faezeh was serving a six-month sentence for "spreading propaganda against the system." Another Rafsanjani's daughter, Fatemeh is President of Charity Foundation for Special Diseases and Mohsen was chairman of Tehran Metro Organization and now is vice President of Azad University. His wife, Effat is the granddaughter of Mohammed Kazem Yazdi.

When he was studying at Qom Seminary, he became interested in politics under Ruhollah Khomeini. He was one of the opposition of Mohammad Reza Shah's White Revolution and accompanied with Khomeini. With Khomeini's exile, Hashemi's role in the fight against the Shah and representing Khomeini in the country was highlighted. This opposition eventually led to his arrest and imprisonment. He was arrested for 7 times from 1960 until 1979 and was in jail for four years and 5 months in total due to his clandestine activities against Pahlavi regime. Despite the anti-Western attitude of Revolutionaries, he had traveled to 20 states of the United States. Although individual major pre-revolutionary speeches against Shah regime, But Khomeini acted him as financial manager of revolutionary struggle as well as connector with other revolutionary groups.

Hashemi refers to the point that the Islamic Republican Party established in the early years of revolution in Iran. Ruhollah Khomeini, at first step, was disagree with establishment of Party because he known the establishment of party as something gradually. But After consultation of Hashemi with Khomeini, the opinion of Khomeini has changed. There were many negotiations and consultations on the instructions of Party .somebodies like Yadollah Sahabi and Habibollah Peyman were to communicate but after a while there were no communication with them. Although Mortaza Motahhari had not any disagreement to establishing party but at the same time he hadn’t any communication with party. In fact, the idea of establishment of republic party was necessary in order to give the Mullahs an organization and political collection. The party has established formally on 17 February 1979, namely two weeks after the victory of Islamic Revolution. The members of the party even determined their members in Kanoon Touhid in early days. The financial expenses of party originated from the voluntary aids of people. At first, religious scholars or clerics took part in the party. In early days there were no financial Problem but after a while the Problem appeared. Khomeini tried to give financial aid to the party with giving money. The members primarily chose from revolutionary individuals and believed persons.

As President, Rafsanjani was credited with spurring Iran's reconstruction following the 1980–88 war with Iraq. Rafsanjani was popular with the upper and middle classes, partially due to his economic reforms during his tenure and his support for human rights (in comparison to the Khomeini years) which have been widely perceived as successful for the most part. However, his reconstruction efforts failed to reach the rural or war zones where they were most needed, leaving him unpopular with the majority of the rural, veteran, and working class populations. His reforms, despite attempting to curb the powers of the ultra-conservatives, failed to do so, and the Iranian Revolutionary Guards received increasing power from Khamenei during his presidency. He was also accused of corruption by both conservatives and reformists, and was known for tough crackdowns on dissent.

The Iranian Mojahedin were recognized as a terrorist organization by both the Iranian government as well as the United States CIA. Regarding the Mojahedin, Rafsanjani said (Ettela'at, 31 October 1981):

He condemned both the United States and Iraq during the Persian Gulf War in 1991. After the war he strove to renew close ties with the West, although he refused to lift Khomeini's fatwa against the British author Salman Rushdie.

Rafsanjani was sought by the Argentinian government for ordering the 1994 AMIA bombing in Buenos Aires. It was based on the allegation that senior Iranian officials planned the attack in an August 1993 meeting, including Khamenei, the Supreme Leader, Mohammad Hejazi, Khamenei's intelligence and security advisor, Rafsanjani, then President, Ali Fallahian, then intelligence minister, and Ali Akbar Velayati, then foreign minister.

In 1997 during the Mykonos trial in Germany, it was declared that Rafsanjani, the then President of Iran, alongside Ayatollah Khamenei, Velayati and Fallahian had a role in the assassination of Iran's opposition Activists in Europe.

Post-presidency, Rafsanjani delivered a sermon at Tehran University in the summer of 1999 praising government use of force to suppress student demonstrations.

He was regarded as flip-flopping between conservative and reformist camps since the election of Mohammad Khatami, supporting reformers in that election, but going back to the conservative camp in the 2000 parliamentary elections as a result of the reformist party severely criticizing and refusing to accept him as their candidate. Reformists, including Akbar Ganji, accused him of involvement in murdering dissidents and Writers during his presidency. In the end, the major differences between the Kargozaran and the reformists party weakened both and eventually resulted in their loss at the presidential elections in 2005. However, Rafsanjani regained close ties with the reformers since he lost the 2005 presidential elections to Mahmoud Ahmadinejad.

In 2003, Forbes named him as one of the richest persons in Iran, with an excess of USD$1 billion in assets. According to a U.S. congressional report, the pistachio trade from Rafsanjan gardens, controlled by his cousin, was worth more than USD$746 million.

After his loss at the presidential elections in 2005, a growing tension between him and President Ahmadinejad arose. Rafsanjani has criticized Ahmadinejad's administration several times for conducting a purge of government officials, slow move towards privatization and recently hostile foreign policy in particular the atomic Energy policy. In return Ahmadinejad fought back that Rafsanjani failed to differentiate privatization with the corrupt takeover of government-owned companies and of foreign policies which led to sanctions against Iran in 1995 and 1996. He also implicitly denounced Rafsanjani and his followers by calling those who criticize his nuclear program as "traitors".

In December 2006, Rafsanjani was elected to the Assembly of Experts representing Tehran with more than 1.5 million votes, which was more than any other candidate. Ahmadinejad's opponents won the majority of local election seats. On 4 September 2007 he was elected Chairman of the Assembly of Experts, the body that selects Iran's supreme leader, in what was considered a blow to the supporters of Mahmoud Ahmadinejad. He won the chairmanship with 41 votes of the 76 cast. His ultraconservative opponent, Ayatollah Ahmad Jannati, received 31 votes. Rafsanjani was re-elected to the position on 10 March 2009, running against Mohammad Yazdi. He received 51 votes compared to Yazdi's 26. On 8 March 2011, he withdrew from the election and Ayatollah Mohammad Reza Mahdavi Kani was elected as his replacement.

Although Rafsanjani was a member of the pragmatic-conservative Combatant Clergy Association, he had a close bond to the Executives of Construction Party and Moderation and Development Party. In 2009, Rafsanjani ceased activity in the Combatant Clergy Association, despite remaining a member.

On 8 March 2011 Rafsanjani lost his post as chairman of the powerful Assembly of Experts, replaced by Ayatollah Mohammad-Reza Mahdavi Kani. Rafsanjani stated that he withdrew from the election for chairman to "avoid division." The loss was said to be the result of intensive lobbying "in recent weeks" by "hardliners and supporters" of President Mahmoud Ahmadinejad, and part of Rafsanjani's gradual loss of power over the years. It was said that Rafsanjani would be dismissed as head of Expediency Discernment Council but he was re-appointed for another five years term on 14 March 2012 by Ali Khamenei.

Hashemi and his partners also owned Islamic Azad University, worth an estimated USD$20–25 billion.

Only months after the revolution, Rafsanjani was shot once in the stomach by gunmen from one of the groups vying for power amid the political turmoil. He was not seriously wounded—and neither was his wife, who jumped in front to shield him from the attack. "Great men of history do not die," Khomeini said in announcing that Rafsanjani had survived.

After winning reelection to his seat at Assembly of Experts as Tehran district's first person, Rafsanjani announced that it was the last time that he joined an election as a candidate and will be retired from politics at the end of the current term. He also said "Now I can die with peace of mind" after seeing election of a moderate parliament in the 2016 legislative election.

Rafsanjani died on 8 January 2017, at 19:30 (UTC+03:30) following a heart attack in Tajrish's Shohada-ye Tajrish Hospital in north Tehran, as reported by Iranian state-run media. He was 82 years old at the time of his death. The government announced three days of national mourning and a public holiday on his funeral day. Black banners were raised in Tehran and other cities and some posters showed the Supreme Leader and Rafsanjani together smiling. Five days of mourning also observed in the southern province of Kerman, where Ayatollah Rafsanjani's hometown of Rafsanjan is located.