Peter Carey was born in Bacchus Marsh in Victoria, Australia, in 1943.

He studied Science at Monash University, and wrote advertising copy to support himself during the early part of his literary career. Australian identity and historical context play a part in several of his literary works.

He began by writing surreal short stories, and published two collections, War Crimes (1979), and The Fat Man in History (1980). These stories, along with three previously uncollected works, are all included in his Collected Stories (1995).

He then wrote 3 novels: Bliss (1981), about an advertising executive who has an out-of-body experience; Illywhacker (1985), a huge vision of Australian history told through the memoirs of a 100-year old confidence man or "illywhacker"; and Oscar and Lucinda (1988), a complex symbolic tale of the arrival of Christianity in Australia. Although not a science fiction writer as such, there are some elements of this in his writing, particularly in Illywhacker, which led to this novel receiving the Ditmar Award for Best Australian Science Fiction Novel and being shortlisted for the World Fantasy Award for Best Novel, both in 1986. Illywhacker was also shortlisted for the Booker Prize for Fiction in 1985, and three years later, Oscar and Lucinda won the same prize.

While writing his next novel, The Tax Inspector (1991), Peter Carey moved to New York, and has since written further novels: The Unusual Life of Tristran Smith (1994); Jack Maggs (1997), billed as a re-imagining of Charles Dickens' Great Expectations; True History of the Kelly Gang (2001), told in fictional letters from the Australian outlaw and folk hero Ned Kelly to his estranged daughter; and My Life as a Fake (2003), a story centred around a literary hoax which gripped Australia in the 1940s. Jack Maggs and True History of the Kelly Gang both won the Commonwealth Writers Prize (Overall Winner, Best Book) and with True History of the Kelly Gang, Peter Carey won the Booker Prize for Fiction for the second time, in 2001.

Peter Carey wrote the script for the Wim Wenders film, Until the End of the World (1992), and co-wrote with Ray Lawrence, the screenplay for the film adaptation of Bliss (1985). Oscar and Lucinda was also adapted for film in 1997, with a screenplay witten by Laura Jones. He has also written a children's book, The Big Bazoohley (1995) and a non-fiction book, 30 Days in Sydney: A Wildly Distorted Account (2001). Wrong about Japan (2005), is a memoir/travelogue of the author's journey through Japan with his son Charley and their attempts to understand the Japanese culture and heritage.

Peter Carey still lives in New York, where he teaches Creative Writing at New York University. He has been awarded three honorary degrees and is a Fellow of the Royal Society of Literature, the Australian Academy of Humanities and the American Academy of Arts and Sciences. His later novels are Theft: A Love Story (2006); and His Illegal Self (2008).

His novel, Parrot and Olivier in America, was published in 2010 and shortlisted for the Commonwealth Writers Prize (South East Asia and South Pacific region, Best Book) and the Man Booker Prize for Fiction. His latest novel is The Chemistry of Tears (2012), which tells the story of a clock expert who is restoring an automaton while grieving for her lost lover.

Peter Carey was appointed an Officer of the Order of Australia for distinguished services to literature, in 2012.