Isadora Duncan was born in San Francisco, the youngest of the four children of Joseph Charles Duncan (1819–1898), a banker, mining Engineer and connoisseur of the arts, and Mary Isadora Gray (1849–1922). Her brothers were Augustin Duncan and Raymond Duncan; her sister, Elizabeth Duncan, was also a Dancer. Soon after Isadora's birth, her Father was exposed in illegal bank dealings, and the family became extremely poor.

In 1896, Duncan became part of Augustin Daly's theater company in New York, but she soon became disillusioned with the form and craved a different environment with less of a hierarchy. Her Father, along with his third wife and their daughter, died in 1898 when the British Passenger steamer SS Mohegan ran aground off the coast of Cornwall.

Feeling unhappy and unappreciated in America, Duncan moved to London in 1898. She performed in the drawing rooms of the wealthy, taking inspiration from the Greek vases and bas-reliefs in the British Museum. The earnings from these engagements enabled her to rent a studio, allowing her to develop her work and create larger performances for the stage. From London, she traveled to Paris, where she was inspired by the Louvre and the Exposition Universelle of 1900.

In 1902, Loie Fuller invited Duncan to tour with her. This took Duncan all over Europe as she created new works using her innovative technique, which emphasized natural movement in contrast to the rigidity of tradition ballet. She spent most of the rest of her life touring Europe and the Americas in this fashion. Despite mixed reaction from critics, Duncan became quite popular for her distinct style and inspired many visual artists, such as Antoine Bourdelle, Auguste Rodin, Arnold Ronnebeck, and Abraham Walkowitz, to create works based on her.

Duncan disliked the commercial aspects of public performance, such as touring and contracts, because she felt they distracted her from her real mission: the creation of beauty and the education of the young. To achieve her mission, she opened schools to teach young women her philosophy of dance. The first was established in 1904 in Berlin-Grunewald, Germany. This institution was the birthplace of the "Isadorables" (Anna, Maria-Theresa, Irma, Liesel, Gretel, and Erika), Duncan's protégées who would continue her legacy. Duncan legally adopted all six girls in 1919, and they took her last name. After about a decade in Berlin, Duncan established a school in Paris that was shortly closed because of the outbreak of World War I.

Duncan bore two children, both out of wedlock. The first, Deirdre Beatrice (born September 24, 1906), by theatre designer Gordon Craig, and the second, Patrick Augustus (born May 1, 1910), by Paris Singer, one of the many sons of sewing machine magnate Isaac Singer. Both children drowned in the care of their nanny in 1913 when their runaway car went into the Seine.

In 1910, Duncan met the occultist Aleister Crowley at a party—an episode recounted by Crowley in his Confessions. He refers to Duncan as 'Lavinia King', and would use the same invented name for her in his novel Moonchild. Crowley wrote of Duncan that she "has this gift of gesture in a very high degree. Let the reader study her dancing, if possible in private than in public, and learn the superb 'unconsciousness'—which is magical consciousness—with which she suits the action to the melody." Crowley was, in fact, more attracted to Duncan's bohemian companion Mary Dempsey (a.k.a. Mary D'Este or Desti), with whom he had an affair. Desti had come to Paris in 1901 where she soon met Duncan, and the two became inseparable. Desti also appeared in Moonchild, as 'Lisa la Giuffria'. She joined Crowley's occult order, helping him to write his magnum opus Magick: Book 4 under her magical name of 'Soror Virakam'; she also co-edited four numbers of Crowley's journal The Equinox, and contributed several collaborative plays to the journal. Desti wrote a memoir of her experiences with Duncan that includes some autobiographical material.

In 1911, the French fashion designer Paul Poiret rented a mansion—Pavillon du Butard in La Celle-Saint-Cloud—and threw lavish parties, including one of the more famous grandes fêtes, La fête de Bacchus on June 20, 1912, re-creating the Bacchanalia hosted by Louis XIV at Versailles. Isadora Duncan, wearing a Greek evening gown designed by Poiret, danced on tables among 300 guests; 900 bottles of champagne were consumed until the first light of day.

Duncan is known as "The Mother of Dance". While her schools in Europe did not last long, Duncan's work had impact in the art and her style is still danced based upon the instruction of Maria-Theresa Duncan, Anna Duncan, and Irma Duncan, three of her six adopted daughters. The adoption process was never verified, but all six of Isadora's Dancers did change their last name to Duncan. Through her sister, Elizabeth, Duncan's approach was adopted by Jarmila Jeřábková from Prague where her legacy persists. By 1913 she was already being celebrated. When the Théâtre des Champs-Élysées was built, Duncan's likeness was carved in its bas-relief over the entrance by Sculptor Antoine Bourdelle and included in painted murals of the nine muses by Maurice Denis in the auditorium. In 1987, she was inducted into the National Museum of Dance and Hall of Fame.

In her autobiography, Duncan relates that she begged a young Italian stranger, the Sculptor Romano Romanelli, to sleep with her because she was desperate for another baby. She became pregnant by him, and gave birth to a son on August 13, 1914; the infant died shortly after birth.

Duncan had been due to leave the United States in 1915 aboard the RMS Lusitania on its ill-fated voyage, but historians believe her financial situation at the time drove her to choose a more modest crossing. In 1921, Duncan's leftist sympathies took her to the Soviet Union, where she founded a school in Moscow. However, the Soviet government's failure to follow through on promises to support her work caused her to return to the West and leave the school to her protégée Irma. In 1924, Duncan composed a dance routine called Varshavianka to the tune of the Polish revolutionary song known in English as Whirlwinds of Danger.

Duncan has attracted literary and artistic attention from the 1920s to the present, in novels, film, ballet, theatre, music, and poetry.

In 1921, after the end of the Russian Revolution, Duncan moved to Moscow where she met the acclaimed poet Sergei Yesenin, who was 18 years her junior. On May 2, 1922, they married, and Yesenin accompanied her on a tour of Europe and the United States. However, the marriage was brief, and in May 1923 he left Duncan and returned to Moscow. Two years later, on December 28, 1925, Yesenin was found dead in his room in the Hotel Angleterre in St Petersburg in an apparent suicide.

Duncan has been portrayed in novels including Aleister Crowley's Moonchild (as 'Lavinia King'), published in 1923, and Upton Sinclair's World's End (1940) and Between Two Worlds (1941), the first two novels in his Pulitzer Prize winning Lanny Budd series. Two characters in the A Series of Unfortunate Events series of novels are named after her, Isadora Quagmire and Duncan Quagmire.

On the night of September 14, 1927, in Nice, France, Duncan was a Passenger in an Amilcar CGSS automobile owned by Benoît Falchetto, a French-Italian mechanic. She wore a long, flowing, hand-painted silk scarf, created by the Russian-born Artist Roman Chatov, a gift from her friend Mary Desti, the mother of American film Director Preston Sturges. Desti, who saw Duncan off, had asked her to wear a cape in the open-air vehicle because of the cold weather, but she would only agree to wear the scarf. As they departed, she reportedly said to Desti and some companions, ["Adieu, mes amis. Je vais à la gloire!"] error: {{lang}}: text has italic markup (help) ("Farewell, my friends. I go to glory!"); but according to the American Novelist Glenway Wescott, Desti later told him that Duncan's actual parting words were, "Je vais à l'amour" ("I am off to love"). Desti considered this embarrassing, as it suggested that she and Falchetto were going to her hotel for a tryst.

Anna, Lisa, Theresa and Irma, pupils of Isadora Duncan's first school, carried on the aesthetic and pedagogical principles of Isadora's work in New York and Paris. Choreographer and Dancer Julia Levien was also instrumental in furthering Duncan's work through the formation of the Duncan Dance Guild in the 1950s and the establishment of the Duncan Centenary Company in 1977.

Duncan had a relationship with the poet and Playwright Mercedes de Acosta, as documented in numerous revealing letters they wrote to each other. In one, Duncan wrote, "Mercedes, lead me with your little strong hands and I will follow you – to the top of a mountain. To the end of the world. Wherever you wish."

Duncan's philosophy of dance moved away from rigid ballet technique and towards what she perceived as natural movement. To restore dance to a high art form instead of merely entertainment, she strove to connect emotions and movement: "I spent long days and nights in the studio seeking that dance which might be the Divine expression of the human spirit through the medium of the body's movement." She believed dance was meant to encircle all that life had to offer—joy and sadness. Duncan took inspiration from ancient Greece and combined it with an American love of freedom. Her movement was feminine and arose from the deepest feelings in her body. This is exemplified in her revolutionary costume of a white Greek tunic and bare feet. Inspired by Greek forms, her tunics also allowed a freedom of movement that corseted ballet costumes and pointe shoes did not. Costumes were not the only inspiration Duncan took from Greece: she was also inspired by ancient Greek art, and utilized some of its forms in her movement (see image).

Another means by which Duncan's dance techniques were carried forth was in the formation of the Isadora Duncan Heritage Society, by Mignon Garland, who had been taught dance by two of Duncan's key students. Garland was such a fan that she later lived in a building erected at the same site and address as Duncan, attached a commemorative plaque near the entrance, which is still there as of 2016. Garland also succeeded in having San Francisco rename an alley on the same block from Adelaide Place to Isadora Duncan Lane.