Fürstenberg was born as Diane Simone Michelle Halfin in Brussels, Belgium, to Jewish parents. Her father was Moldovian-born Leon (Lipa) Halfin, who had migrated to Belgium in 1929 from Chişinău. Her mother was Greek-born Liliane Nahmias, a Holocaust survivor. 18 months before Fürstenberg was born, her mother was a prisoner at Auschwitz concentration camp. Fürstenberg has spoken broadly about her mother's influence in her life, crediting her with teaching her that "fear is not an option".

At university, when she was 18, she met Prince Egon von Fürstenberg, the elder son of Prince Tassilo zu Fürstenberg, a German Roman Catholic Prince, and his first wife, Clara Agnelli, an heiress to the Fiat Automotive fortune and member of the Italian nobility. Married in 1969, the couple had two children, Prince Alexander, and Princess Tatiana, who were born in New York City. She is now the grandmother of four, including Princess Talita.

A year after marrying, Diane von Fürstenberg began designing women's clothes: "The minute I knew I was about to be Egon's wife, I decided to have a career. I wanted to be someone of my own, and not just a plain little girl who got married beyond her desserts." After the Fürstenbergs separated in 1973 (they were divorced in 1983), Egon also became a fashion designer. After moving to New York, she met high-profile Vogue Editor Diana Vreeland, who declared her designs "absolutely smashing". She had her name listed on the Fashion Calendar for New York Fashion Week, and so her Business was created.

In 1974, she introduced the knitted jersey "wrap dress", an Example of which, due to its influence on women's fashion, is in the collection of the Costume Institute of the Metropolitan Museum of Art. After the success of the wrap dress, Furstenberg was featured on the cover of Newsweek magazine in 1976. The accompanying article declared her "the most marketable woman since Coco Chanel." She launched a cosmetic line and her first fragrance, "Tatiana", named after her daughter. The New York Times reported that by 1979 the annual Retail sales for the company were $150 million.

In 1985, Fürstenberg moved to Paris, France where she founded Salvy, a French-language publishing house. Fürstenberg started a number of other businesses including a line of cosmetics and a home-shopping Business, which she launched in 1991. In 1992, Fürstenberg sold 1.2 million dollars worth of her Silk Assets collection in two hours on QVC. She credited this success with giving her the confidence to re-launch her company.

Fürstenberg re-launched her company in 1997, and re-introduced the wrap dress, which gained traction with an entirely new generation of women. In 1998, she published her Business memoir, Diane: A Signature Life. In 2004, she introduced the DVF by H. Stern fine jewelry collection, and launched scarves and beachwear. In 2006, she was elected as President of the Council of Fashion Designers of America, a position she still holds today. In 2008, she received a star on Seventh Avenue's Fashion Walk of Fame.

In 2001, she married American media mogul Barry Diller.

She is President of the Council of Fashion Designers of America (CFDA), a position she has held since 2006; in 2014 was listed as the 68th most powerful woman in the world by Forbes; and in 2015 was included in the Time 100, as an Icon, by Time Magazine.

In 2009, Michelle Obama wore the DVF signature Chain Link print wrap dress on The Official White House Christmas Card. That same year, a large-scale retrospective exhibition entitled "Diane von Furstenberg: Journey of a Dress" opened at the Manezh, one of Moscow's largest public exhibition spaces. The show was curated by Andre Leon Talley and attracted a lot of media attention. In 2010, the exhibition traveled to São Paulo, and in 2011, to the Pace Gallery in Beijing.

In 2010, von Fürstenberg was awarded a Gold Medal at the annual Queen Sofia Spanish Institute Gold Medal Gala. In 2011, DVF introduced a home collection as well as a signature fragrance, DIANE.

In 2012, Fürstenberg launched her first children’s collection with GapKids and a denim collaboration with CURRENT/ELLIOTT.

Fürstenberg is a Director of The Diller – von Furstenberg Family Foundation, which provides support to non-profit organizations in the area of community building, education, human rights, arts, health and the environment. The foundation supports the "DVF Awards", presented annually to four women who display leadership, strength, and courage in their commitment to women's causes. In 2011, the foundation made a $20 million commitment to the High Line.

In 2014, the E! network aired the first season of reality show House of DVF. Contestants on the show performed various tasks and challenges in the hopes of becoming a global brand ambassador for Diane von Furstenberg. The show has since returned for a second season.

In 2016, Fürstenberg designed shirts for Hillary Clinton's presidential campaign.

Fürstenberg sits on the board of Vital Voices, a women’s leadership organization, and served as one of the project chairs for New York City Mayor Michael Bloomberg's review of the Future of NYC's Fashion industry, which was prepared by NYCEDC.