Fraser was born in Southwark, London. Her year of birth was usually attributed as 1933, which she gave when auditioning for her role in I'm All Right Jack, as the Boulting Brothers wanted someone younger for the part. She is actually three years older, confirmed in her autobiography, Liz Fraser ... and Other Characters, published by Signum Books in 2012. Her father was a travelling salesman for a brewery and her mother owned a shop just off the New Kent Road. Family life was disrupted by the Second World War when she was evacuated, initially to Westerham in Kent and then, when that was deemed still too vulnerable to the bombs, to Chudleigh, a village in Devon. Her father died in May 1942, aged 40, when she was 11.

Her first film appearance was in Touch and Go (1955) credited as Elizabeth Frazer and The Smallest Show on Earth (1957) in which she worked with Peter Sellers for the first time. Further film appearances include I'm All Right, Jack (1959) for which she received a BAFTA nomination as Most Promising Newcomer, Two-Way Stretch (1960), The Bulldog Breed (1960), Double Bunk (1961) The Painted Smile (1962). The Americanization of Emily (1964), The Family Way (1966), Dad's Army (1971), the sex comedies Adventures of a Taxi Driver (1976), Confessions of a Driving Instructor (1976), Adventures of a Private Eye (1977) and Rosie Dixon – Night Nurse (1978), and four of the Carry On films: Carry On Regardless (1961), Carry On Cruising (1962), Carry On Cabby (1963) and Carry On Behind (1975).

She married Peter Yonwin, a travelling salesman, in November 1958 but the marriage soon broke down and they divorced. She married her second husband, Bill Hitchcock, a TV Director, in January 1965 at Harrow Register Office. At that time, they agreed not to work together, but this changed in 1972 when she appeared in the Rodney Bewes sitcom Albert! which Hitchcock co-directed, and again later in the same year, when she acted in Turnbull's Finest Half-Hour, a comedy series starring Michael Bates and produced by Hitchcock. Hitchcock died from a pulmonary embolism in February 1974 at the age of 45.

She appeared on Benny Hill's late-1950s TV shows, and in a single Sketch in the 23 December 1970 episode of his Thames TV series. As this episode was in black & white (due to the "colour strike" by TV technicians, who wanted to be paid extra for working with the then-new colour TV technology), the Sketch was not included in any of the half-hour syndicated episodes of the Benny Hill Show. However, it is included in the Volume 1 box set of the complete Benny Hill Show, issued by A&E and Fremantle.