Eberhard was born in Berkeley, California on May 15, 1960. He grew up in Kensington, California, attending Kensington Hilltop Elementary School there. He attended junior high school and high school in adjacent El Cerrito until the middle of 11th grade, when his family moved to Elmhurst, Illinois. He graduated from York Community High School in 1978.

Eberhard received his undergraduate degree in computer engineering in 1982, from the University of Illinois at Urbana-Champaign. He subsequently earned his Masters Degree in electrical engineering in 1983 from the same school.

He is married to Carolyn Eberhard whom he met at the University of Illinois where they have been annual donors to the university's College of Engineering since 1984.

Eberhard's interest in Sports cars, dependence on oil imported, and global warming led him to found Silicon Valley's first automobile company. In 2003 Eberhard co-founded (with Marc Tarpenning) and became the first CEO of Tesla Motors, an electric car company in San Carlos, California. Eberhard drives the second of Tesla Motors Founder's Series Roadsters cars, which is the first series of the Tesla Roadster (2008). The Tesla Roadster is a battery electric sportscar with 244 miles (393 km) (EPA) range.

On November 30, 2007 Tesla released a press release titled "Martin Eberhard, Co-founder of Tesla Motors, to Transition to Advisory Board." According to the Tesla Motors Club forum and CNN Money, Martin was asked to leave, but the reason for being asked is not publicly available.

On January 7, 2008, the New York Times reported that Tesla Motors issued a statement explaining that the co-founder and former chief executive, Martin Eberhard, “has transitioned from the board of Directors and executive management of the company to the advisory board.” On January 7, 2008, Eberhard confirmed that he was no longer employed in Tesla Motors and was only a shareholder in the company. He said he planned to start another company entirely in the green tech field. Eberhard maintained a blog at teslafounders.com that had his version of Tesla's history while he had a lawsuit against Elon Musk for libel until he dropped his lawsuit in August 2009; the blog was deleted afterwards and it is assumed there was a settlement between the parties.

In 2010, Martin Eberhard confirmed to Autoblog Green that he was doing work with Volkswagen, but no further details have been provided.

Later, he worked at Lucid Motors, a startup funded by LeEco and others which was created to compete with Tesla, until 2015.

In October, 2017, Eberhard joined Sokon Industry Group when that company acquired Inevit. This branch was renamed SF Motors.