Khalidi was born in New York. Khalidi is the son of Ismail Khalidi and the nephew of Husayin al-Khalidi. He is the father of Ismail Khalidi, a writer. He grew up in New York City where his father, a Saudi citizen of Palestinian origins who was born in Jerusalem, worked for the United Nations. Khalidi's mother, a Lebanese-American Christian born in the United States, was an interior decorator. Khalidi attended the United Nations International School.

In 1970, Khalidi received a B.A. from Yale University,

where he was a member of the [[Wolf's Head (secret society)|Wolf's Head Society]]. He then received a D. Phil. from [[Oxford University]] in 1974. Between 1976 and 1983, Khalidi “was teaching full time as an Assistant Professor in the Political Studies and Public Administration Dept. at the [[American University of Beirut]], published two books and several articles, and also was a research fellow at the independent [[Institute for Palestine Studies]]." He has also taught at the [[Lebanese University]].

Khalidi became politically active in Beirut, where he resided through the 1982 Lebanon War. "I was deeply involved in politics in Beirut" in the 1970s, he said in an interview. Khalidi was cited in the media during this period, sometimes as an official with the Palestinian News Service, Wafa, or directly with the Palestinian Liberation Organization. However, Khalidi has denied that he was a PLO spokesman, stating that he "often spoke to journalists in Beirut, who usually cited me without attribution as a well-informed Palestinian source. If some misidentified me at the time, I am not aware of it." Subsequently sources disagreed as to the nature or existence of Khalidi's official relationship with the organization.

Returning to America, Khalidi spent two years teaching at Columbia University before joining the faculty of the University of Chicago in 1987, where he spent eight years as a professor and director of both the Center for Middle Eastern Studies and the Center for International Studies at the University of Chicago. During the Gulf War, while teaching at Chicago, Khalidi "emerged "as one of the most influential commentators from within Middle Eastern Studies." In 2003 he joined the faculty of Columbia University, where he currently serves as the Edward Said Professor of Modern Arab Studies. He has also taught at Georgetown University.

Khalidi is married to Mona Khalidi, who is the Assistant Dean of Student Affairs and the Assistant Director of Graduate Studies of the School of International and Public Affairs at Columbia University.He is a member of the National Advisory Committee of the U.S. Interreligious Committee for Peace in the Middle East, which describes itself as "a national organization of Jews, Christians and Muslims dedicated to dialogue, education and advocacy for peace based on the deepest teachings of the three religious traditions."

He is member of the Board of Sponsors of The Palestine—Israel Journal, a publication founded by Ziad AbuZayyad and Victor Cygielman, prominent Palestinian and Israeli journalists. He is founding trustee of The Center for Palestine Research and Studies. He is also a member of the Council on Foreign Relations.

In October 2010, Khalidi delivered the annual Edward Said memorial lecture at the Palestine Center in Washington.

Khalidi’s research covers primarily the history of the modern Middle East. He focuses on the countries of the southern and eastern Mediterranean, with an eye to the emergence of various national identities and the role played by external powers in their development. He also researches the impact of the press on forming new senses of community, the role of education in the construction of political identity, and in the way narratives have developed over the past centuries in the region. Michael C. Hudson, director of the Center for Contemporary Arab Studies at Georgetown, describes Khalidi as "preeminent in his field." He served as President of the Middle East Studies Association of North America in 1994 and is currently the editor of the Journal of Palestine Studies.

Much of Khalidi's scholarly work in the 1990s focused on the historical construction of nationalism in the Arab world. Drawing on the work of theorist Benedict Anderson who described nations as "imagined communities", he does not posit primordial national identities, but argues that these nations have legitimacy and rights. In Palestinian Identity: The Construction of Modern National Consciousness (1997), he places the emergence of Palestinian national identity in the context of Ottoman and British colonialism as well as the early Zionist effort in the Levant. Palestinian Identity won the Middle East Studies Association’s top honor, the Albert Hourani Prize as best book of 1997.

His dating of the emergence of Palestinian nationalism to the early 20th century and his tracing of its contours provide a rejoinder to Israeli nationalist claims that Palestinians had no collective claims prior to the 1948 creation of Israel. His signature work, Palestinian Identity: The Construction of Modern National Consciousness (Columbia University Press, 1997), argues that Arabs living in Palestine began to regard themselves as a distinct people decades before 1948, "and that the struggle against Zionism does not by itself sufficiently explain Palestinian nationalism."

In it, Khalidi also describes the late development, failings and internal divisions within the various elements of the Palestinian nationalist movement.

In Resurrecting Empire: Western Footprints and America's Perilous Path in the Middle East (2004), Khalidi takes readers on a historical tour of Western involvement in the Middle East, and argues that these interactions continue to have a colonialist nature that is both morally unacceptable and likely to backfire. Khalidi's most recent book, Sowing Crisis, places the United States approach to the Middle East in historical context. He is sharply critical of U.S. policies during the Cold War, writing that Cold War policies "formulated to oppose the Soviets, consistently undermined democracy and exacerbated tensions in the Middle East."

Khalidi has written, "It may seem hard to believe today, but for decades the United States was in fact a major patron, indeed in some respects the major patron, of earlier incarnations" of radical, militant Islam, in order to use all possible resources in waging the Cold War. He adds, "The Cold War was over, but its tragic sequels, its toxic debris, and its unexploded mines continued to cause great harm, in ways largely unrecognized in American discourse."

Historian and Israeli Ambassador to the United States Michael Oren acknowledges that "Khalidi is mainstream" because "the stream itself has changed."

Palestinian Identity

Palestinian Identity: The Construction of Modern National Consciousness (1997), is Khalidi's most influential and most widely cited book. In Palestinian Identity, Khalidi demonstrates that a Palestinian national consciousness had it origins near the beginning of the twentieth century. Khalidi describes the Arab population of British Mandatory Palestine as having "overlapping identities," with some or many expressing loyalties to villages, regions, a projected nation of Palestine, an alternative of inclusion in a Greater Syria, an Arab national project, as well as to Islam. Nevertheless, Palestinian Identity was the first to demonstrate substantive Palestinian nationalism in the early Mandatory period. As Khalidi writes, "Local patriotism could not yet be described as nation-state nationalism."

Khalidi also documents active opposition by the Arab press to Zionism in the 1880s.

Khalidi has written dozens of scholarly articles on Middle East history and politics, as well as op-ed pieces in many U.S. newspapers. He has also been a guest on radio and TV shows including All Things Considered, Talk of the Nation, Morning Edition, Worldview, The News Hour with Jim Lehrer, Charlie Rose, and Nightline, and has appeared on the BBC, the CBC, France Inter and the Voice of America. He served as president of the American Committee on Jerusalem, now known as the American Task Force on Palestine.

Views on Israeli-Palestinian conflict

Khalidi has written that the establishment of the state of Israel resulted in "the uprooting of the world's oldest and most secure Jewish communities, which had found in the Arab lands a tolerance that, albeit imperfect, was nonexistent in the often genocidal, Jew-hating Christian West." Regarding the proposed two-state solution to the Israel-Palestinian conflict, Khalidi has written that "the now universally applauded two-state solution faces the juggernaut of Israel's actions in the occupied territories over more than forty years, actions that have been expressly designed to make its realization in any meaningful form impossible." However, Khalidi also noted that "there are also flaws in the alternatives, grouped under the rubric of the one-state solution".

Regarding American support for Israel, Khalidi stated in an interview that "every other single place on the face of the earth is in support of the Palestinians, yet all of them together aren't a hill of beans compared to the United States and Israel, because the United States and Israel can basically do anything they please. They are the world superpower, they are the regional superpower."

A New York Sun editorial criticized Khalidi for stating that there is a legal right under international law for Palestinians to resist Israeli occupation. For example, in a speech given to the American-Arab Anti-Discrimination Committee, Khalidi said that “[k]illing civilians is a war crime. It’s a violation of international law. They are not soldiers. They’re civilians, they’re unarmed. The ones who are armed, the ones who are soldiers, the ones who are in occupation, that's different. That's resistance.” The Sun editorial argued that by failing to distinguish between Palestinian combatants and noncombatants, Khalidi implies that all Palestinians have this right to resist, which it claimed was incorrect under international law. In an interview discussing this editorial, Khalidi objected to this characterization as incorrect and taken out of the context of his statements on international law.

Khalidi has described discussions of Arab restitution for property confiscated from Jewish refugees forced to flee Middle Eastern and North African countries after the creation of Israel as “insidious”, "because the advocates of Jewish refugees are not working to get those legitimate assets back but are in fact trying to cancel out the debt of Israel toward Palestinian refugees."

Khalidi opposes the Iraq War and has said that “we owe reparations to the Iraqi people.”

NYC teacher training program

In 2005 Khalidi's participation in a New York City teacher training program was ended by the city's Schools Chancellor. The Chancellor, Joel I. Klein, issued a statement that “Considering his past statements, Rashid Khalidi should not have been included in a program that provided professional development for [Department of Education] teachers and he won't be participating in the future.” Following the decision, Columbia University president Lee Bollinger spoke out on Khalidi's behalf, writing: "The department's decision to dismiss Professor Khalidi from the program was wrong and violates First Amendment principles... The decision was based solely on his purported political views and was made without any consultation and apparently without any review of the facts."

2008 U.S. presidential campaign

Consequent to publication by the Los Angeles Times of an article about Obama's attendance at a 2003 farewell dinner for Khalidi, their relationship became an issue in the campaign. Some opponents of Barack Obama claimed that the relationship between Obama and Khalidi was evidence that Obama would not maintain a pro-Israel foreign policy if elected. When asked, Obama called his own commitment to Israel "unshakeable" and he does not consult with Khalidi on foreign policy. Opponents of Republican candidate John McCain pointed out that he had served as chairman of the International Republican Institute (IRI) during the 1990s which provided grants worth $500,000 to the Center for Palestine Research and Studies. which was co-founded by Khalidi, for the purpose of polling the views of the Palestinian people.

New York Times columnist Clyde Haberman said of Khalidi's book The Story of the Palestinian Struggle for Statehood: "But he makes this more than an exercise in self-pity by refusing to let the Palestinians themselves off the hook. If they indeed live in an iron cage, well, Khalidi says, they helped mold the bars themselves" and asks "When he talks about repressive Israeli measures having been 'sometimes imposed on the pretext of security,' critics are bound to ask: What pretext? How many suicide bombings of cafes and pizza shops does it take before a country has a right to end them by any method that seems to work?"Efraim Karsh said about the same book "One would have hoped that after 80 years of stubborn adherence to the 'one-state solution' and an equally adamant rejection of the 'two-state solution,' which have resulted in Palestinian statelessness, all but the most fanatically self-deluded would grasp the root causes of the Palestinian debacle ... not least a historian purporting to redress the 'continuing refusal to look honestly at what has happened in this small land over the past century or so.'"