Cate Kennedy had a peripatetic childhood, living with her parents in several Australian states and the United Kingdom. She studied at the then Canberra College of Advanced Education (later the University of Canberra) and the Australian National University, gaining a BA and a B.Litt. She has worked as a freelance later, been engaged as a writer-in residence at various Melbourne schools and taught creative writing to senior students and scriptwriting to University of Ballarat students. For several years, Kennedy was also a community arts worker in Daylesford in country Victoria and has been involved in the organisation of various street festivals in Victoria.
In the 1990s, Kennedy spent two years in Central Mexico, working in a cooperative as a volunteer with Australian Volunteers International, teaching literacy to peasant communities. During this time she wrote mainly non-fiction.
Primarily a short story writer, Kennedy has won numerous awards for her work, which has been published in major Australian newspapers. It was her observations while working for the Australian Customs Service that inspired Kennedy to write her prize-winning short story Habit about a dying woman's attempt to smuggle cocaine into the country. Her writing of poetry resulted in her collection Signs of Other Fires (2001) which draws on her experiences in Mexico and on her observations of daily life. The following year she won the Vincent Buckley Poetry Prize, thus enabling her to travel to Ireland to study and teach.
Her sole novel (as of 2019), The World Beneath (2009), won the People's Choice Award at the NSW Premier's Literary Awards in 2010, and in the same year was shortlisted for the Barbara Jefferis Award, the Christina Stead Award (NSW Premier's Literary Awards), the ALS Gold Medal, the Australian Book Industry Award's Literary Fiction Book of the Year, and the Age's Fiction Prize.
Kennedy is, however, better known for her short work. In addition to Signs of Other Fires, she has published three additional volumes of poetry (as at 2017): Joyflight (2004), Crucible and Other Poems (2006), and The Taste of River Water (2011). The latter won the C.J. Dennis Prize (Victorian Premier's Literary Awards) in 2011, and was shortlisted for both the Western Australian Premier's Book Award (for poetry) and the Colin Roderick Award.
Kennedy has also written collections of short stories, including Dark Roots (2006) and Like a House on Fire (2012). Dark Roots was shortlisted for the Steel Rudd Award (Queensland Premier's Literary Awards) and highly commended by the ALS Gold Medal, and Like a House on Fire won the Steele Rudd Award and was shortlisted for both the Kibble Award and the Stella Prize.
Kennedy has lived on a farm on the Broken River in northeast Victoria.