Hambly was born in San Diego, California and grew up in Montclair, California. Her parents, Edward Everett Hambly Sr. and Florence Moraski Hambly, are from a coal-mining town in eastern Pennsylvania. She has an older sister, Mary Ann Sanders, and a younger brother, Edward Everett Hambly Jr.

Hambly has a Masters in Medieval History from the University of California at Riverside, completing her degree in 1975 and spending a year in Bordeaux as part of her studies. Her first novel to be published was Time of the Dark in 1982 by Del Rey.

Hambly was married for some years to fellow science fiction writer George Alec Effinger before his death in 2002. She now lives in Los Angeles. Hambly speaks freely of suffering from seasonal affective disorder, which was undiagnosed for years