Born in Calcutta, India into a wealthy family, Mukherjee was given the chance to receive a university education at home, which she continued in the United States and in Canada. It was there that she met Canadian writer Clark Blaise. The couple have been married since 1963, and they have two sons.
Mukherjee's stories revolve around the culture clash experienced by Indians who have emigrated to North America but still have difficulty acculturating. For example, in "A Father" (from her 1985 collection Darkness), a religious Hindu's hopes for a harmonious family life are shattered when he learns that his grown-up but still single daughter has had artificial insemination because she wants a baby but rejects men. In "The Lady from Lucknow" (in the same volume), the bored wife of an Indian academic adapts to the American way of life by committing adultery with an unexciting middle-aged WASP.
Mukherjee's most successful and popular work of fiction so far is her novel Jasmine (1989), in which a young Indian woman becomes an illegal immigrant to the United States, acculturates by taking on a series of different identities, and ends up as the mother in a patchwork family.
Blaise and Mukherjee have also co-authored a travel memoir, Days and Nights in Calcutta.