Marion Halligan was born and educated in Newcastle. She worked as a school teacher and freelance journalist before publishing her first short stories in the early 1980s. Halligan was a prolific reviewer and short story writer, winning awards in both fields. Her first collection of stories, The Living Hothouse (1988), won a number of awards, including the Steele Rudd Award. She published her first novel in 1987 and has published eleven novels, with her final novel appearing in 2015. Her most admired work is Lovers' Knots: A Hundred-Year Novel (1992), which won many awards, including the Age Book of the Year Award. Her 1996 novel The Golden Dress was shortlisted for the Miles Franklin Award.
Many of Halligan's stories and novels are set in Canberra and explore individual lives in the city's academic culture. Lovers' Knots is set in Newcastle and tells the story of one family's growth in a loosely plotted narrative that provides glimpses of the family at various times. Halligan also wrote a book about food that won the Prize for Gastronomic Writing in 1991. Her book The Fog Garden (2001) drew many elements from her own experience of losing her husband to cancer. In 2022, she published Words for Lucy, an account of the death of her daughter.
Halligan served as chairperson of the Literature Board of the Australia Council and the Australian National Word Festival, and was patron of the ACT Writers' Centre (later renamed Marion) for many years. She was writer-in-residence at several institutions and has received a number of grants from the Literature Board of the Australia Council. She resided in Canberra and wrote full-time.