Bier studied art and architecture at Bezalel Academy of Arts and Design in Jerusalem and read architecture at Architectural Association School of Architecture in London before enrolling for the film direction course at the National Film School of Denmark from where she graduated in 1987. De Saliges (1987), Bier's graduation film, won first prize at the Munich film school festival and was subsequently distributed by Channel Four.

Bier has two children, Gabriel (born in 1989) and Alice Esther (born in 1995). She lives with theatre Producer and Composer Jesper Winge Leisner.

Finding immediate success in Denmark with her features Freud Flytter Hjemmefra (Freud's Leaving Home, 1990), Det Bli’r i Familien (Family Matters, 1993), Pensionat Oscar (Like it Was Never Before, 1995) and Sekten (Credo, 1997), her first large commercial success was The One and Only in 1999. A romantic comedy about the fragility of life, the film won a clutch of Danish Film Academy awards and established Bier's relationship with Actress Paprika Steen. The film remains one of the most successful domestic films ever released in Denmark.

A sidestep from the easy going charm of Livet är en schlager (Once in a Lifetime, 2000), Elsker dig for evigt (Open Hearts, 2002) brought Bier's work to much wider international attention and acclaim. Acutely observed and beautifully written by Bier and Anders Thomas Jensen, the film is a perceptive and painful exploration of broken lives and interconnected tragedies. Made under Dogme 95 regulations, the film also marked a move towards a more minimalist aesthetic.

Since the completion of Open Hearts, Bier's reputation has continued to ascend with the harrowing Brødre (Brothers, 2004) and the emotionally engaging Efter Brylluppet (After the Wedding, 2006), which was nominated for Best Foreign Language film at the 2007 Academy Awards. After her first American film, Things We Lost in the Fire (2008) starring Benicio del Toro and Halle Berry, Bier went on to win the Oscar for Best Foreign Language film for In a Better World (2010).

Bier has been praised as being a Director capable of making films that appeal to an international market. This is reflected by the fact that After the Wedding (2006) was nominated for an Academy Award for Best Foreign Language Film and In a Better World (2010) went on to win the award in 2011. And not least the international TV miniseries The Night Manager (2016) produced by BBC and AMC which received worldwide acclaim upon its premiere. It went on to receive 12 Primetime Emmy Awards nominations, winning one for Susanne Bier's directing efforts and four Golden Globe-nominations and three wins.

In 2012, she returned to romantic comedy with local Danish smash-hit Den skaldede frisør (Love is All You Need) (2012) starring Trine Dyrholm and Pierce Brosnan. And in 2014, she directed her second American feature, dark romantic drama Serena starring Jennifer Lawrence and Bradley Cooper, and shortly after followed up with Danish drama A Second Chance starring Nikolaj Coster-Waldau, Ulrich Thomsen, Nikolaj Lie Kaas and Maria Bonnevie.

In 2013 she was a member of the jury at the 63rd Berlin International Film Festival.