Wilson was born in Burbank, California, on July 24, 1987 to Mike Wilson, a television broadcast engineer, and the late Suzie Shapiro Wilson, a homemaker. Wilson's mother was Jewish, and her father is of part Irish descent. She was raised Jewish and became an atheist when she was 15. She has three older brothers named Danny, Jon, and Joel, and a younger sister named Anna. Her mother was diagnosed with breast cancer on March 10, 1995, and died on April 26, 1996, after the filming of Matilda. The movie was released after her death and was dedicated to Suzie's memory. After her mother died, Wilson lost some of her passion for acting.
Wilson became interested in acting after watching her oldest brother Danny act. Mara's parents refused to let her act, but they eventually reluctantly agreed to let her go into acting. After acting in commercials for Lunchables, Bank of America, Texaco, and Marshall's, Mara was invited to audition for the 1993 comedy film Mrs. Doubtfire and won the part of Natalie Hillard. This was followed by the 1994 remake of Miracle on 34th Street. In 1994, she had a recurring role as Nikki Petrova on Melrose Place and played Barbara Barton in the television film A Time to Heal.
Wilson sang "Make 'Em Laugh" at the 67th Academy Awards telecast on March 27, 1995, with Tim Curry and Kathy Najimy. In 1995, she won the ShoWest Award for "Young Star of the Year". Her performances in those films caught the attention of Danny DeVito and led to her being cast as Matilda Wormwood in Matilda. She then went on to star in A Simple Wish alongside Martin Short.
In 1999, she played Willow Johnson in the 1999 Disney Channel television film Balloon Farm.
Wilson auditioned for the 1998 remake of The Parent Trap, but she was considered to be too young for the role.
In 1998 Wilson went to a table reading of What Dreams May Come starring Robin Williams, but she did not get the part.
Her appearance in the 2000 film Thomas and the Magic Railroad was her last major film role to date. At that point, scripts were being sent to her so that she did not have to go to auditions.
Before taking a 12-year hiatus from acting, she got the script for Donnie Darko but declined to audition for the film.
In 2012, Wilson appeared briefly in one episode of a web series called Missed Connection in the role of Bitty and made special appearances on internet review shows for That Guy with the Glasses — most notably a comedic turn playing an adult Matilda during a review of Matilda by The Nostalgia Chick, Lindsay Ellis. That year, when asked why she quit film acting, Wilson explained: "Film acting is not very fun. Doing the same thing over and over again until, in the director's eyes, you 'get it right', does not allow for very much creative freedom. The best times I had on film sets were the times the director let me express myself, but those were rare."
Wilson has a recurring role on the podcast Welcome to Night Vale as "The Faceless Old Woman Who Secretly Lives in Your Home", as well as her own storytelling show called What Are You Afraid Of? Her goal is to turn What Are You Afraid Of? into a podcast. In 2016, Wilson made a brief return to television by appearing as a waitress on an episode of Broad City. She also voiced Jill Pill, a writer/director anthropomorphic spider, in season 3 of BoJack Horseman.
In May 2013, Wilson wrote an article for online magazine Cracked.com, offering her opinion of the delinquency of some former child stars.
As of 2013, she works for Publicolor.
Her play Sheeple was produced in 2013 for the New York International Fringe Festival.
In an interview that December, Wilson stated that her film acting days are over, and that she is instead focusing on writing.
Wilson went to the Idyllwild Arts Academy near Palm Springs, California, and graduated in 2009 from New York University's Tisch School of the Arts. While at New York University she appeared in her own one-woman show called Weren't You That Girl?
When Wilson was 12, she was diagnosed with obsessive–compulsive disorder. Wilson has struggled with anxiety and depression. In 2015, she teamed up with Project UROK, a nonprofit organization whose mission is to aid teens with mental illness. Wilson appeared in a video in which she talks about the mental illnesses she has experienced, including anxiety, depression, and obsessive-compulsive disorder.
As of 2013, she lives in Queens, New York, and is involved with New York storytelling and comedy.
Following the 2016 Orlando nightclub shooting, Wilson came out as bisexual in solidarity with the LGBT community.
In an NPR interview, Nancy Cartwright stated that a young Mara Wilson was the inspiration for a character's voice on The Simpsons episode "Bart Sells His Soul."
Wilson won a Young Artist Award for her role in A Simple Wish in "Best Performance in a Feature Film Leading Young Actress" and a Young Star Award for Matilda in "Best Performance by a Young Actress in a Comedy Film". She was twice nominated for a Saturn Award for Best Performance by a Younger Actor, for Matilda and A Simple Wish.1995 – ShoWest Award – Young Star of the Year.Cinderella (2005)Weren't You That Girl? (2009)What Are You Afraid Of? (2014)Sheeple (2013)Where Am I Now?: True Stories of Girlhood and Accidental Fame (2016)