Smith was born in Fort Worth, Texas. She married her high school sweetheart, George Edward Beeman, a World War II bombardier, in 1944. But she left him to enroll in college and they were divorced several years later.

Smith graduated from the University of Texas at Austin with a degree in Journalism in 1949, where she wrote for The Daily Texan, then moved to New York where she worked as a typist, a proofreader and a reporter before she broke into the media world as a news producer for Mike Wallace at CBS Radio. She spent five years as a News producer for NBC-TV.

In the late 1950s Smith worked as a ghostwriter for the popular Cholly Knickerbocker gossip column that appeared in the Hearst newspapers. After leaving that column in the early 1960s she went to work for Helen Gurley Brown as the entertainment editor for the American version of Cosmopolitan magazine, later working simultaneously as Sports Illustrated entertainment editor as well.

Liz Smith is one of the founding members, along with Lesley Stahl, Mary Wells Lawrence and Joni Evans of wowOwow.com. A new website for women to talk culture, politics and gossip.

On February 16, 1976, Smith began a self-titled gossip column for the New York Daily News. During a 1979 newspaper strike, her Daily News editors asked her to appear daily on WNBC-TV's Live at Five, and she stayed with the program for eleven years. Her exposure on television made Smith a popular figure on the Manhattan social scene and provided fodder for her column which had, by then, been syndicated to nearly seventy newspapers. She won an Emmy for her reporting on the hot hit "Live at Five" for WNBC in 1985

Smith was hired by Fox Broadcasting Company heads Barry Diller and Rupert Murdoch to develop a talk show with Roger Ailes as her producer.

In 1991 Smith, hot off her exclusive interviews with Ivana Trump during her divorce from real estate tycoon Donald Trump, moved to Newsday, where she stayed until 1995. Smith then signed on to the Murdoch-owned New York Post. She worked for Fox News for 7 years and is today on "Fox and Friends."

In April 2005, Smith left Newsday, over a contract dispute. The official discontinuation of her column came after several months of dispute among Smith, her lawyer David Blasband, and Newsday management. Lawyers for Newsday focused on a misstep and refused to renew her contract, the highest-paid in newspaper history. Blasband says, "Yes, Liz missed the date, but Newsday still had four months before the contract ran out." The matter was settled out of court and Smith continued at the New York Post where her column still appears. It also appears two days a week in Variety and in many other newspapers.

On February 24, 2009, the Post announced that the paper would stop running Smith's column effective February 26, 2009, as a cost-cutting measure.

Her 2000 memoir Natural Blonde made New York Times Best Seller list. In 2005, Smith published Dishing: Great Dish — And Dishes — From America's Most Beloved Gossip Columnist.

Smith acknowledged her bisexuality (or as she refers to it, 'gender neutrality') in her memoirs. She is twice-divorced and currently resides alone in an apartment in Manhattan's Murray Hill neighborhood.

She was a good friend of former Texas Governor Ann Richards, and helped her to acculturate to New York City society after Richards left Texas.