Malcolm was born in Prague in 1934, one of two daughters--the other is author Marie Winn-- of a psychiatrist father. She has resided in the United States since her family emigrated from Czechoslovakia in 1939. Malcolm was educated at the University of Michigan and lives in New York City. Her first husband, Donald Malcolm, reviewed books for The New Yorker in the 1950s and 1960's. Her second husband, whom she wed in 1975, was long-time New Yorker editor Gardner Botsford; Botsford died at age 87 in September, 2004.

Early Malcolm book jackets report her "living in New York with her husband and daughter." Her daughter is also mentioned in the text of The Crime of Sheila McGough.

Publication of articles in The New Yorker, and of the subsequent book In The Freud Archives, triggered a $10 million legal challenge by psychoanalyst Jeffrey Moussaieff Masson, former project director for the Freud Archives. In his 1984 lawsuit, Masson claimed that Malcolm had libelled him by fabricating quotations attributed to him; these quotes, Masson contended, had brought him into disrepute.

Malcolm claimed that Masson had called himself an "intellectual gigolo", and that he had slept with over 1000 women. She also claimed that he said he wanted to turn the Freud estate into a haven of "sex, women and fun"; and claimed that he was, "after Freud, the greatest analyst that ever lived." Malcolm was unable to produce all the disputed material on tape. The case was partially adjudicated before the Supreme Court, and after a decade of proceedings, a jury finally found against Masson in 1994 on the grounds that, whether or not the quotations were genuine, more evidence was needed to rule against Malcolm. (See the opinion at Masson v. New Yorker Magazine, Inc. (89-1799), 501 U.S. 496 (1991))

In August, 1995, Malcolm claimed to have discovered a misplaced notebook containing three of the disputed quotes. As reported in The New York Times the author "declared in an affidavit under penalty of perjury that the notes were genuine."

The thesis of The Journalist and the Murderer is contained in its first sentence: "Every journalist who is not too stupid or too full of himself to notice what is going on knows that what he does is morally indefensible."

Malcolm's example was popular non-fiction writer Joe McGinniss, author of The Selling of the President, among others; while researching his non-fiction, true crime book Fatal Vision, McGinniss lived with the defense team of former Green Beret doctor Jeffrey MacDonald, then on trial for the 1970 murders of his two daughters and pregnant wife. In the published Fatal Vision, McGinniss concluded that MacDonald was a sociopath and had been unbalanced by amphetamines when he slew his family. McGinniss drew upon the work of social critic Christopher Lasch to construct a portrait of MacDonald as a "pathological narcissist".

Malcolm contended that McGinniss was pressed into this strategy for professional and structural reasons ... by MacDonald's "lack of vividness" as a real-life character who would be carrying the book. "As every journalist will confirm," Malcolm writes,

"MacDonald's uninterestingness is not unusual at all...When a journalist fetches up against someone like [him], all he can do is flee and hope that a more suitable subject will turn up soon. In the MacDonald-McGinniss case we have an instance of a journalist who apparently found out too late that the subject of his book was not up to scratch ... not a member of the wonderful race of auto-fictionalizers, like Joseph Mitchell's Joe Gould and Truman Capote's Perry Smith, on whom the "non-fiction novel" depends for its life...The solution that McGinniss arrived at for dealing with MacDonald's characterlessness was not a satisfactory one, but it had to do."

Per Malcolm, it was to conceal this deficit that McGinniss quoted liberally from Lasch's 1979 study The Culture of Narcissism. This, to her, was a professional sin. McGinniss' moral sin, his "indefensible" act in her view, was to pretend to a belief in MacDonald's innocence, long after he'd become convinced of the man's guilt.

The book created a sensation when in March 1989 it appeared in two parts in The New Yorker magazine. Roundly criticized upon first publication, the book is still controversial, though some have since become regarded as a classic, and ranks ninety-seventh in The Modern Library's list of the twentieth century's "100 Best Works of Nonfiction". As Douglas McCollum wrote in the Columbia Journalism Review, "In the decade after Malcolm's essay appeared, her once controversial theory became received wisdom."

'Janet Malcolm's witty and wicked Psychoanalysis: The Impossible Profession has been praised by psychoanalysts (with justice) as a dependable introduction to analytic theory and technique. It has the rare advantage over more solemn texts of being funny as well as informative'.