The daughter of Francis W. Wilson (c. 1788 – 1858), a clerk, and his wife, Margaret Oliphant (c. 1789 – 17 September 1854), she was born at Wallyford, near Musselburgh, East Lothian, and spent her childhood at Lasswade (near Dalkeith), Glasgow and Liverpool. As a girl, she constantly experimented with writing. In 1849 she had her first novel published: Passages in the Life of Mrs. Margaret Maitland. This dealt with the Scottish Free Church movement, with which her parents had sympathised, and which had met with some success. It was followed by Caleb Field in 1851, the year in which she met the publisher William Blackwood in Edinburgh and was invited to contribute to Blackwood's Magazine. The connection would last for her lifetime, during which she contributed well over 100 articles, including a critique of the character of Arthur Dimmesdale in Nathaniel Hawthorne's The Scarlet Letter.
In May 1852, she married her cousin, Frank Wilson Oliphant, at Birkenhead, and settled at Harrington Square, now in Camden, London. Her husband was an artist working mainly in stained glass. Three of their six children died in infancy. The father himself developed alarming symptoms of consumption (tuberculosis). For the sake of his health they moved in January 1859 to Florence, and then to Rome, where he died. His wife, left almost entirely without resources, returned to England and took up the burden of supporting her three remaining children by her literary activity.
She had now become a popular writer and worked with notable industry to sustain her position. Unfortunately, her home life was full of sorrow and disappointment. In January 1864 her only remaining daughter Maggie died in Rome and was buried in her father's grave. Her brother, who had emigrated to Canada, was shortly afterwards involved in financial ruin. Mrs Oliphant offered a home to him and his children, adding their support to already heavy responsibilities.
In 1866 she settled at Windsor to be near her sons, who were being educated at Eton. That year, her second cousin, Annie Louisa Walker, came to live with her as a companion-housekeeper. This was her home for the rest of her life. For more than thirty years she pursued a varied literary career, but continued to have personal troubles. The ambitions she cherished for her sons were unfulfilled. Cyril Francis, the elder, died in 1890, leaving a Life of Alfred de Musset, incorporated in his mother's Foreign Classics for English Readers. The younger, Francis (whom she called "Cecco"), collaborated with her in the Victorian Age of English Literature and won a position at the British Museum, but was rejected by Sir Andrew Clark, a famous physician. Cecco died in 1894. With the last of her children lost to her, she had but little further interest in life. Her health steadily declined, and she died at Wimbledon on 20 June 1897. She was buried in Eton beside her sons. She left a personal estate with gross value £4,932 and net value £804.
In the 1880s she was the literary mentor of the Irish novelist Emily Lawless. During this time Oliphant wrote several works of supernatural fiction, including the long ghost story A Beleaguered City (1880) and several short tales, including "The Open Door" and "Old Lady Mary".