Mendelsohn was born in Melbourne, Victoria, the son of Carole Ann (née Ferguson) and Frederick Arthur Oscar Mendelsohn. His father is a prominent medical researcher who previously headed the Howard Florey Institute in Melbourne, where he maintains the status of Professor Emeritus. Ben and his two brothers, Tom and David, as well as his mother (deceased), a registered nurse, lived in Europe and the US for long periods of time, and returned to Melbourne in high school. He attended Heidelberg Primary School and Eltham High & Banyule High Schools. He took drama because he thought it was an easy class. Mendelsohn was the only one of his friends to follow up with an audition for Crawford Productions that was being advertised.
In October 2009, he was featured in the Australian series Who Do You Think You Are?, tracing the ancestry of his paternal grandfather, who was from a Jewish family, as well as convicts on his mother's side. Searching for a connection to composer Felix Mendelssohn, which was eventually dismissed, he discovered links to 19th century Prussia. His ancestors were amongst the first Prussian Jews to be naturalised in Schneidemühl in the province of Posen, now Piła in modern Poland.
After several early television roles, including The Henderson Kids alongside Kylie Minogue, he attracted notice in his breakout film, The Year My Voice Broke (1987), winning him the Australian Film Institute Award for Best Supporting Actor. His next major role was in The Big Steal (1990), and Spotswood (1992) co-starring with Anthony Hopkins; this was followed in 1996 by Cosi and Idiot Box. In 2000 he was in two contrasting films, the Australian Mullet and the Hollywood Vertical Limit.
In 2005, he was preparing to play Mark Antony in the Sydney Theatre Company-produced Julius Caesar, and he was in the Terrence Malick-directed film The New World.
In 2007, Mendelsohn starred in the third season of the TV series Love My Way and in 2008, he appeared in Baz Luhrmann's Australia and filmed the 10-part Melbourne series Tangle, which premiered on Showcase in 2009. In 2009, he appeared in the American science fiction film Knowing directed by Alex Proyas. The same year, Mendelsohn starred as Ned in Beautiful Kate, directed by Rachel Ward, opposite Bryan Brown and Rachel Griffiths.
In 2010, he appeared in Animal Kingdom, starring in the film as Andrew "Pope" Cody, a criminal on the run from the law living in the notorious Melbourne Underworld. This role won him many awards including IF Award's Best Actor and the AFI's award for Best Actor in a Leading Role. He was also named GQ Australia's Actor of the Year for 2010.
He was selected as one of the entrants to the Who's Who in Australia 2012 edition. In 2012, Mendelsohn played the supporting roles of John Daggett in Christopher Nolan's The Dark Knight Rises and Robin Van Der Hook in Derek Cianfrance's The Place Beyond the Pines.
In 2012, he appeared in Florence + the Machine's music video for "Lover to Lover". The video was directed by Vincent Haycock. In 2013, he guest starred in the TV series Girls as the father of Jessa, played by Jemima Kirke.
In 2014, Mendelsohn joined the cast of Bloodline, a Netflix original from the creators of Damages. The first season premiered on the site on 20 March 2015 and was well received. Mendelsohn's performance on the series has been critically lauded, resulting in a Primetime Emmy Award win as well as a Golden Globe Award nomination. In September 2016, Netflix announced that the show had been cancelled, and that it will end after its third season in 2017.
In the Autumn of 2016, he appeared in video as an onstage "stand-in" during the Nostalgia For the Present concert tour of Australian singer Sia Furler for her song, "Breathe Me."
In December 2016, he had a supporting role in the Star Wars franchise's Rogue One, portraying one of the films' villains Director Krennic. He called the opportunity to act in a Star Wars film "a childhood dream come true." Mendelsohn also narrated the virtual band Gorillaz' fourth album Humanz.
Whilst filming Adoration (2013 film), Mendelsohn took time free to pose for artist Sally West, whom he had been neighbours with in Bondi in the 1990s. The resulting portrait has been nominated for several awards.
Mendelsohn married British author Emma Forrest in June 2012. He has two daughters, one with Forrest, born in 2014, and one from a previous relationship.
Mendelsohn and his wife separated on 1 December 2016, with Forrest filing for divorce on 23 December citing "irreconcilable differences".