Gilpin grew up in Virginia's Shenandoah Valley, where her parents raised Thoroughbred horses. She graduated from Concord (Mass.) Academy in 1964 and received a B.A. in history magna cum laude from Bryn Mawr College in 1968. She took the name Faust when she married in 1968; the marriage ended in 1976. She earned M.A. (1971) and Ph.D. (1975) degrees in American civilization from the University of Pennsylvania, where she joined the faculty as an assistant professor in 1976. In 1984 she became a full professor; she subsequently held endowed professorships, chaired the department of American civilization, and directed the women's studies program. In 2001 Faust became founding dean of the Radcliffe Institute for Advanced Study at Harvard, the successor to Radcliffe College, which had been Harvard University's women's college; she was also appointed Lincoln Professor of History at Harvard.

In July 2007 Faust became the 28th president of Harvard University. She was the first woman to hold the office and the first president since the 17th century who did not have a Harvard degree. She succeeded Lawrence H. Summers, who resigned in the wake of controversy over remarks that attributed women's lack of visibility in the sciences to intrinsic sex differences. Within her first six months in office, Faust filled several open deanships and appointed other top administration officials. She also supervised a major campus expansion in nearby Boston, assessment and expansion of the role of the arts in the university, and continuation of work on a substantial revision of the undergraduate curriculum.

Faust's publications include A Sacred Circle: The Dilemma of the Intellectual in the Old South, 1840–1860 (1977), The Creation of Confederate Nationalism: Ideology and Identity in the Civil War South (1982), James Henry Hammond and the Old South: A Design for Mastery (1982), Southern Stories: Slaveholders in Peace and War (1992), and Mothers of Invention: Women of the Slaveholding South in the American Civil War (1996), which received the 1997 Francis Parkman Prize from the Society of American Historians. This Republic of Suffering: Death and the American Civil War (2008) assesses the lasting impact of Civil War fatalities on American attitudes toward death.

Faust served as an officer of the American Historical Association and the Southern Historical Association, a board member of the Society of American Historians and the Organization of American Historians, and a judge for the Pulitzer Prize in history. She was elected to the American Academy of Arts and Sciences in 1994 and the American Philosophical Society in 2004.