Donnelly's grandparents fled from Dublin, Ireland to the Adirondack region of New York, and her grandmother worked at a hotel on Big Moose Lake -- later the setting of Donnelly's A Northern Light. Donnelly's own childhood was spent both in Rye (in Westchester County, downstate) and Port Leyden (in Lewis County, upstate).

Donnelly attended the University of Rochester, majoring in English Literature and European History and graduating Cum laude with distinction in English Literature. She later attended Birkbeck College in London, England.

Donnelly moved back to New York, to Brooklyn, at the age of 25. After ten years of work, Donnelly published her first novel, The Tea Rose. The Tea Rose is the first book of a trilogy based in the 19th Century in London's East End, with ties to the story of Jack the Ripper. The second book, The Winter Rose, continues the tale, following the Finnegan family and related characters from London to Africa to the coast of Northern California. She is currently working on the third in the series, The Wild Rose, which will follow Willa and Seamie's story and is due to be published by Hyperion in August, 2011.

A Northern Light was her second published novel, and biggest success to date. The young adult novel is based around the infamous murder of Grace Brown by Chester Gillette in the Adirondack Mountains in 1906. This case was earlier the basis for Theodore Dreiser's epic An American Tragedy as well as the film A Place in the Sun.

In 2004, A Northern Light won the Los Angeles Times Book Prize, as well as the Carnegie Medal in the UK (where the novel was published as A Gathering Light.)

Her second young adult novel, Revolution, is a tale of two teenage girls -- one in present-day Brooklyn and one in Paris during the French Revolution -- whose stories interweave as they struggle to make sense of the tragedies they encounter. The book was published in October, 2010 by Delacorte Press, an imprint of Random House, with a first run of 250,000 copies. It was named a Best Book of the Monthby Amazon.com and was ranked by Indiebound as the number one pick on its Autumn 2010 Kids' Next List.

Donnelly currently lives in New York's Hudson Valley with her husband, daughter, and one rescued greyhound.