In 1878, william married Alice Howe Gibbens. Soon after, his sister became ill. When Alice James was close to death in 1892 she wrote this in her journal: “the fact is, I have been dead so long and it has been simply such a grim shoving of the hours behind me…since the hideous summer of ’78, when I went down to the deep sea, its dark waters closed over me and I knew neither hope nor peace.”

Born into a wealthy and intellectually active family, daughter of Henry James Sr. of Albany, and Mary Robertson Walsh, James soon developed the psychological and physical problems that would plague her until the end of her life at age 43. The youngest of five children, she lived with her parents until their deaths in 1882. She taught history from 1873 to 1876 for the Society to Encourage Studies at Home, a Boston-based correspondence school for women founded by Anna Ticknor. James never married, seeking affection from her brothers and female friends instead. By 1882, she suffered at least two major breakdowns and would experience several more before her death from breast cancer at age 43 in 1892.

In the Victorian era, hysteria was an extremely Common diagnosis for women. Almost any disease a woman had could fit the symptoms of hysteria because there was no set list of symptoms. In 1888, twenty years after James was "overwhelmed by violent turns of hysteria", she wrote in her diary that she was both suicidal and homicidal. She was struggling with the urge to kill her father, though this diary entry does not state the reason why she was patricidal. In 1866 James traveled to New York to receive "therapeutic exercise", and in 1884 she received electrical "massage". Hoping that a change of scenery would improve her health, she traveled to England with her companion Katharine Loring. She suffered recurring bouts of "hysteria" for the next eight years until she died from breast cancer. James sought various treatments for her disorders but never found significant relief.

James began to keep a diary in 1889. Full of witty, acerbic, insightful comments on English life and manners, it included excerpts from various publications to support her opinions. The diary was not published for many years after her death due to sharp comments on various persons whom she had mentioned by name. A poorly edited version of the diary was eventually released in 1934. Leon Edel published a fuller edition in 1964. The diary has made James something of a feminist icon: she was seen as struggling through her illnesses to find her own voice. Henry, one of Alice’s brothers, read this work with deep alarm (because of its candid indiscretions about family and friends) but also with enormous admiration. He wrote another of the James brothers, william, that he now understood what had caused their sister’s debility. The diary, he said, displayed for him Alice’s great "energy and personality of intellectual and moral being," but also, "puts before me what I was tremendously conscious of in her lifetime -- that the extraordinary intensity of her will and personality really would have made the equal, the reciprocal life of a ’well’ person—in the usual world—almost impossible to her—so that her disastrous, her tragic health was in a manner the only solution for her of the practical problems of life—as it suppressed the element of equality, reciprocity, etc."

Anna Robeson Brown Burr wrote a biography, Alice James, Her Brothers – Her Journal (1934). Jean Strouse published what has become the standard life (Alice James: a Biography) in 1980. Strouse steered something of a middle course between Alice-as-icon and Alice-as-victim. Ruth Yeazell published James' correspondence in The Death and Letters of Alice James (1981). Susan Sontag wrote a play about James, Alice in Bed (1993), which seems to waver between sympathy and impatience with its subject. More recently, Lynne Alexander wrote a sympathetic novel about Alice James, The Sister (2012).

Alice and her brother william had a close relationship that has been argued to consist of eroticism. william would write “mock sonnets” to Alice and read them to her in front of their family. One such sonnet has william declaring his Desire to marry Alice to which she replies that he had told her not “to hope for love from [him].” william concludes the sonnet by saying that he will commit suicide since Alice will not marry him. There were also times where his letters to her were candidly erotic—he would describe her physical and personality characteristics and state how “desirable” and “lovable” they made her.

The fourth Sketch created by william of his sister contains a drawing of her head when she was a young teen. Alice’s eyes are cast downward and underneath her head, william wrote the caption, “The loveress of W.J.” The fifth Sketch william drew of Alice when she was in her late teens. She is seen wearing a tight bodice and a feather hat. Across from her eye is a heart with an arrow through it, suggesting that she is in love. William’s initials are drawn on the sleeve covering Alice’s arm. This has been suggested to mean that william has branded his sister as his and she was content with this as she wore her ‘heart’ on her sleeve.