Sigrid Undset was born on 20 May 1882 in the small town of Kalundborg, Denmark, at the childhood home of her mother, Charlotte Undset (1855–1939, née Anna Maria Charlotte Gyth). Undset was the eldest of three daughters. She and her family moved to Norway when she was two.

She joined the Norwegian Authors' Union in 1907 and from 1933 through 1935 headed its Literary Council, eventually serving as the union's chairman from 1936 until 1940.

Undset's books sold well from the start, and, after the publication of her third book, she left her office job and prepared to live on her income as a Writer. Having been granted a writer's scholarship, she set out on a lengthy journey in Europe. After short stops in Denmark and Germany, she continued to Italy, arriving in Rome in December 1909, where she remained for nine months. Undset's parents had had a close relationship with Rome, and, during her stay there, she followed in their footsteps. The encounter with Southern Europe meant a great deal to her; she made friends within the circle of Scandinavian artists and Writers in Rome.

This realistic period culminated in the novels Jenny (1911) and Vaaren (Spring) (1914). The first is about a woman Painter who, as a result of romantic crises, believes that she is wasting her life, and, in the end, commits suicide. The other tells of a woman who succeeds in saving both herself and her love from a serious matrimonial crisis, finally creating a secure family. These books placed Undset apart from the incipient women's emancipation movement in Europe.

Undset and Svarstad were married in 1912 and went to stay in London for six months. From London, they returned to Rome, where their first child was born in January 1913. A boy, he was named after his father. In the years up to 1919, she had another child, and the household also took in Svarstad's three children from his first marriage. These were difficult years: her second child, a girl, was mentally handicapped, as was one of Svarstad's sons.

After the birth of her third child, and with a secure roof over her head, she started on a major project: Kristin Lavransdatter. She was at home in the subject matter, having written a short novel at an earlier stage about a period in Norwegian history closer to the Pre-Christian era. She had also published a Norwegian retelling of the Arthurian legends. She had studied Old Norse manuscripts and Medieval chronicles and visited and examined Medieval churches and monasteries, both at home and abroad. She was now an authority on the period she was portraying and a very different person from the 22-year-old who had written her first novel about the Middle Ages. What had happened to her in the meantime has to do with more than history and literature; it has just as much to do with her development as a person. She had experienced love and passion. She had been in despair over a sick world in the throes of the bloodbath of the First World War. When she started on Kristin Lavransdatter in 1919, she knew what life was about.

It was only after the end of her marriage that Undset grew mature enough to write her masterpiece. In the years between 1920 and 1927, she first published the three-volume Kristin, and then the 4-volume Olav (Audunssøn), swiftly translated into English as The Master of Hestviken. Simultaneously with this creative process, she was engaged in trying to find meaning in her own life, finding the answer in God.

However, she did not turn to the established Lutheran Church of Norway, where she had been nominally reared. She was received into the Catholic Church in November 1924, after thorough instruction from the Catholic priest in her local parish. She was 42 years old. She subsequently became a lay Dominican.

She grew up in the Norwegian capital, Oslo (or Kristiania, as it was known until 1925). When she was only 11 years old, her father, the Norwegian archaeologist Ingvald Martin Undset (1853–1893), died at the age of 40 after a long illness.

At the end of this creative eruption, Undset entered calmer waters. After 1929, she completed a series of novels set in contemporary Oslo, with a strong Catholic element. She selected her themes from the small Catholic community in Norway. But here also, the main theme is love. She also published a number of weighty historical works which put the history of Norway into a sober perspective. In addition, she translated several Icelandic sagas into Modern Norwegian and published a number of literary essays, mainly on English literature, of which a long essay on the Brontë sisters, and one on D. H. Lawrence, are especially worth mentioning. These are not great literature, but they are strong and inspiring.

In 1934, she published Eleven Years Old, an autobiographical work. With a minimum of camouflage, it tells the story of her own childhood in Kristiania, of her home, rich in intellectual values and love, and of her sick father. It is one of the most fetching Norwegian books ever written about a little girl.

In 1940, Undset and her younger son left neutral Sweden for the United States. There, she untiringly pleaded her occupied country's cause and that of Europe's Jews in writings, speeches and interviews. She lived in Brooklyn Heights, New York. She was active in St. Ansgar's Scandinavian Catholic League and wrote several articles for its bulletin.

Following the German execution of the Danish Lutheran pastor Kaj Munk on 4 January 1944, the Danish resistance newspaper De frie Danske printed condemning articles from influential Scandinavians, including Undset.

Undset returned to Norway after the liberation in 1945. She lived another four years but never published another word. Undset died at 67 in Lillehammer, Norway, where she had lived from 1919 through 1940. She was buried in the village of Mesnali, 15 kilometers east of Lillehammer, where also her daughter and the son who died in battle are remembered. The grave is recognizable by three black crosses.

Undset experimented with modernist tropes such as stream of consciousness in her novel, although the original English translation by Charles Archer excised many of these passages. In 1997, the first volume of Tiina Nunnally's new translation of the work won the PEN/Faulkner Award for Fiction in the category of translation. The names of each volume were translated by Archer as The Bridal Wreath, The Mistress of Husaby, and The Cross, and by Nunnally as The Wreath, The Wife, and The Cross.