Educated privately and at the Academy of Fine Arts, Copenhagen, Dinesen married her cousin, Baron Bror Blixen-Finecke, in 1914 and went with him to Africa. There they owned and directed a coffee plantation in Kenya and became big-game hunters. After her divorce in 1921 she continued to operate the plantation for 10 years until mismanagement, drought, and the falling price of coffee forced her return to Denmark.

Her years in Kenya are recorded in a nonfiction book, Out of Africa (1937; Den afrikanske farm). These highly regarded memoirs of her years in Kenya reveal an almost mystical love of Africa and its people. The book is a poetic reminiscence of her triumphs and her sorrows on the loss of her farm, the death of her companion, the English hunter Denys Finch Hatton, and the disappearance of the simple African way of life she admired. In 1944 she produced her only novel Gengældelsens veje (The Angelic Avengers) under the pseudonym Pierre Andrézel. It is a melodramatic tale of innocents who defeat their apparently benevolent but actually evil captor, but Danish readers saw in it a clever satire of Nazi-occupied Denmark.

She initially wrote first in English and then rewrote her books in Danish, but her later books usually appeared simultaneously in both languages. Dinesen's characteristic writings were in the form of tales—highly polished narratives in the Romantic tradition. Collections include Seven Gothic Tales (1934; Syv fantastiske fortællinger), Winter's Tales (1942; Vinter-eventyr), and Last Tales (1957; Sidste fortællinger). Carnival: Entertainments and Posthumous Tales (1977) includes uncollected or hitherto unpublished stories. Her other posthumously published works include Daguerreotypes, and Other Essays (1979) and Letters from Africa, 1914–31 (1981).