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Mistral was born in Vicuña, Chile, but was raised in the small Andean village of Montegrande, where she attended the Primary school taught by her older sister, Emelina Molina. She respected her sister greatly, despite the many financial problems that Emelina brought her in later years. Her father, Juan Gerónimo Godoy Villanueva, was also a schoolteacher. He abandoned the family before she was three years old, and died, long since estranged from the family, in 1911. Throughout her early years she was never far from poverty. By age fifteen, she was supporting herself and her mother, Petronila Alcayaga, a seamstress, by working as a teacher's aide in the seaside town of Compañia Baja, near La Serena, Chile.

In 1904 Mistral published some early poems, such as Ensoñaciones ("Dreams"), Carta Íntima ("Intimate Letter") and Junto al Mar, in the local newspaper El Coquimbo: Diario Radical, and La Voz de Elqui using a range of pseudonyms and variations on her civil name.

Probably in about 1906, while working as a teacher, Mistral met Romelio Ureta, a railway worker, who killed himself in 1909. The profound effects of death were already in the poet's work; writing about his suicide led the poet to consider death and life more broadly than previous generations of Latin American poets. While Mistral had passionate friendships with various men and women, and these impacted her writings, she was secretive about her emotional life.

An important moment of formal recognition came on December 22, 1914, when Mistral was awarded first prize in a national literary contest Juegos Florales in Santiago(the capital of chile), with the work Sonetos de la Muerte (Sonnets of Death). She had been using the pen name Gabriela Mistral since June 1908 for much of her writing. After winning the Juegos Florales she infrequently used her given name of Lucilla Godoy for her publications. She formed her pseudonym from the two of her favorite poets, Gabriele D'Annunzio and Frédéric Mistral or, as another story has it, from a composite of the Archangel Gabriel and the Mistral wind of Provence.

Mistral's meteoric rise in Chile's national school system plays out against the complex politics of Chile in the first two decades of the 20th century. In her adolescence, the need for teachers was so great, and the number of trained teachers was so small, especially in the rural areas, that anyone who was willing could find work as a teacher. Access to good schools was difficult, however, and the young woman lacked the political and social connections necessary to attend the Normal School: She was turned down, without explanation, in 1907. She later identified the obstacle to her entry as the school's chaplain, Father Ignacio Munizaga, who was aware of her publications in the local newspapers, her advocacy of liberalizing education and giving greater access to the schools to all social classes.

Although her formal education had ended by 1900, she was able to get work as a teacher thanks to her older sister, Emelina, who had likewise begun as a teacher's aide and was responsible for much of the poet's early education. The poet was able to rise from one post to another because of her publications in local and national newspapers and magazines. Her willingness to move was also a factor. Between the years 1906 and 1912 she had taught, successively, in three schools near La Serena, then in Barrancas, then Traiguén in 1910, and in Antofagasta in the desert north, in 1911. By 1912 she had moved to work in a liceo, or high school, in Los Andes, where she stayed for six years and often visited Santiago. In 1918 Pedro Aguirre Cerda, then Minister of Education, and a future president of Chile, promoted her appointment to direct a liceo in Punta Arenas. She moved on to Temuco in 1920, then to Santiago, where in 1921, she defeated a candidate connected with the Radical Party, Josefina Dey del Castillo to be named director of Santiago's Liceo #6, the newest and most prestigious girls' school in Chile. Controversies over the nomination of Gabriela Mistral to the highly coveted post in Santiago were among the factors that made her decide to accept an invitation to work in Mexico in 1922, with that country's Minister of Education, José Vasconcelos. He had her join in the nation's plan to reform libraries and schools, to start a national education system. That year she published Desolación in New York, which further promoted the international acclaim she had already been receiving thanks to her journalism and public speaking. A year later she published Lecturas para Mujeres (Readings for Women), a text in prose and verse that celebrates Latin America from the broad, Americanist perspective developed in the wake of the Mexican Revolution.

Following almost two years in Mexico she traveled from Laredo, Texas to Washington D.C., where she addressed the Pan American Union, went on to New York, then toured Europe: In Madrid she published Ternura (Tenderness), a collection of lullabies and rondas written for an audience of children, parents, and other poets. In early 1925 she returned to Chile, where she formally retired from the nation's education system, and received a pension. It wasn't a moment too soon: The legislature had just agreed to the demands of the teachers union, headed by Mistral's lifelong rival, Amanda Labarca Hubertson, that only university-trained teachers should be given posts in the schools. The University of Chile had granted her the academic title of Spanish Professor in 1923, although her formal education ended before she was 12 years old. Her autodidacticism was remarkable, a testimony to the flourishing culture of newspapers, magazines, and books in provincial Chile, as well as to her personal determination and verbal genius.

Mistral's international stature made it highly unlikely that she would remain in Chile. In mid-1925 she was invited to represent Latin America in the newly formed Institute for Intellectual Cooperation of the League of Nations. With her relocation to France in early 1926 she was effectively an exile for the rest of her life. She made a living, at first, from journalism and then giving lectures in the United States and in Latin America, including Puerto Rico. She variously toured the Caribbean, Brazil, Uruguay, and Argentina, among other places.

Mistral lived primarily in France and Italy between 1926 and 1932. During these years she worked for the League for Intellectual Cooperation of the League of Nations, attending conferences of women and educators throughout Europe and occasionally in the Americas. She held a visiting professorship at Barnard College of Columbia University in 1930–1931, worked briefly at Middlebury College and Vassar College in 1931, and was warmly received at the University of Puerto Rico at Rio Piedras, where she variously gave conferences or wrote, in 1931, 1932, and 1933.

Like many Latin American artists and intellectuals, Mistral served as a consul from 1932 until her death, working in Naples, Madrid, Lisbon, Nice, Petrópolis, Los Angeles, Santa Barbara, Veracruz, Rapallo, and New York. As consul in Madrid, she had occasional professional interactions with another Chilean consul and Nobel Prize winner, Pablo Neruda, and she was among the earlier writers to recognize the importance and originality of his work, which she had known while he was a teenager and she was school director in his hometown of Temuco.

She published hundreds of articles in magazines and newspapers throughout the Spanish-speaking world. Among her confidants were Eduardo Santos, President of Colombia, all of the elected Presidents of Chile from 1922 to her death in 1957, Eduardo Frei Montalva, Chilean elected president in 1964 and Eleanor Roosevelt.

The poet's second major volume of poetry, Tala, appeared in 1938, published in Buenos Aires with the help of longtime friend and correspondent Victoria Ocampo. The proceeds for the sale were devoted to children orphaned by the Spanish Civil War. This volume includes many poems celebrating the customs and folklore of Latin America as well as Mediterranean Europe. Mistral uniquely fuses these locales and concerns, a reflection of her identification as "una mestiza de vasco," her European Basque-Indigenous Amerindian background.

On August 14, 1943, Mistral's 17-year-old nephew, Juan Miguel Godoy, killed himself. Mistral considered Juan Miguel as a son. The grief of this death, as well as her responses to tensions of World War II and then the Cold War in Europe and the Americas, are all reflected in the last volume of poetry published in her lifetime, Lagar, which appeared in a truncated form in 1954. A final volume of poetry, Poema de Chile, was edited posthumously by her friend Doris Dana and published in 1967. Poema de Chile describes the poet's return to Chile after death, in the company of an Indian boy from the Atacama desert and an Andean deer, the huemul. This collection of poetry anticipates the interests in objective description and re-vision of the epic tradition just then becoming evident among poets of the Americas, all of whom Mistral read carefully.

Poor health somewhat slowed Mistral's traveling. During the last years of her life she made her home in the town of Roslyn, New York; in early January 1957 she transferred to Hempstead, New York, where she died from pancreatic cancer on January 10, 1957, aged 67. Her remains were returned to Chile nine days later. The Chilean government declared three days of national mourning, and hundreds of thousands of Chileans came to pay her their respects.

Some of Mistral's best known poems include Piececitos de Niño, Balada, Todas Íbamos a ser Reinas, La Oración de la Maestra, El Ángel Guardián, Decálogo del Artista and La Flor del Aire. She wrote and published some 800 essays in magazines and newspapers; she was also a well-known correspondent and highly regarded orator both in person and over the radio.

Mistral may be most widely quoted in English for Su Nombre es Hoy (His Name is Today):