Canetti was descended from Spanish Sephardic Jews. He wrote in German, his third language, his first two being Ladino (Judeo-Spanish) and English. He learned the latter when his parents settled in England. After his father's death in 1913, he moved with his mother to Vienna. Educated in Zürich, Frankfurt, and Vienna, Canetti received a doctorate in chemistry at the University of Vienna in 1929.

Canetti's interest in crowds crystallized after he witnessed street rioting over inflation in Frankfurt in the 1920s and the burning by an angry mob of the Vienna Palace of Justice in 1927. A planned eight-novel saga of the disorder he saw around him was reduced to Die Blendung (1935; Auto-da-Fé, or The Tower of Babel), the story of a scholar's degradation and destruction in the grotesque underworld of a city.

In 1938 Canetti immigrated to England, devoting his time to research on mass psychology and the allure of fascism. His major work, Masse und Macht (1960; Crowds and Power), is an outgrowth of that interest, which is also evident in Canetti's three plays: Hochzeit (1932; The Wedding), Komödie der Eitelkeit (1950; Comedy of Vanity), and Die Befristeten (1964; The Numbered). The first two were first performed in Braunschweig, W.Ger., in 1965 and the third in Oxford, Eng., in 1956. They were published as Dramen in 1964.

In addition to novels and plays, Canetti also published Die Provinz des Menschen: Aufzeichnungen 1942–1972 (1973; The Human Province), Das Geheimherz der Uhr: Aufzeichnungen 1973–1985 (1987; The Secret Heart of the Clock), and Die Fliegenpein (1992; The Agony of Flies), all excerpts from his notebooks; and Der Ohrenzeuge: Fünfzig Charaktere (1974; Earwitness: Fifty Characters), a book of character sketches.

Canetti published three volumes of autobiography: Die gerettete Zunge (1977; The Tongue Set Free), Die Fackel im Ohr (1980; The Torch in My Ear), and Das Augenspiel (1985; The Play of the Eyes). A fourth volume, written in the early 1990s, was published posthumously as Party im Blitz (2003; Party in the Blitz).