Puig spent his childhood in a small village on the pampas, but moved at age 13 to Buenos Aires, where he pursued his high school and university studies. He had hoped that Buenos Aires would prove to be like life in the movies, but the city's reality, with its repression and violence, disappointed his expectations. Puig learned English as a child by seeing every American film he could. He went to Rome in 1957 to study film directing and resided for a time in Stockholm and London. When he returned to Buenos Aires his film scripts were not well received, and he decided that the cinema was not to be his only career.

Puig's first novel, La traición de Rita Hayworth (1968; Betrayed by Rita Hayworth), is a semiautobiographical account of a boy who escapes the boredom of living on the pampas by fantasizing about the lives of the stars he has seen in motion pictures. The book was later described by Puig as a vehicle for dealing with the oppression of women and the development of a latent-homosexual child. Puig used shifting points of view, flashbacks, and interior monologue to portray the frustration and alienation of his characters, whose only escape is offered by the vacuous world of films and pop art. The style of his second novel, Boquitas pintadas (1969; “Painted Little Mouths”; Eng. trans. Heartbreak Tango), parodied the serialized novels that are popular in Argentina. The Buenos Aires Affair (1973) is a detective novel describing the psychopathic behaviour of characters who are sexually repressed. Kiss of the Spider Woman is a novel told in dialogues between a middle-aged homosexual and a younger revolutionary who are detained in the same jail cell. The book's denunciation of sexual and political repression, treated poetically and with an uncommon degree of tenderness, contributed to its success. Puig's later books include Pubis angelical (1979; Eng. trans. Pubis angelical) and Maldición eterna a quien lea estas páginas (1980; Eternal Curse on the Reader of These Pages). The major novels were translated into more than a dozen languages, and several of his film scripts won awards.

In the mid-1970s, unhappy with the Peróns' regime in Argentina and perhaps still seeking a life that would resemble the movies, Puig left his native country. He lived in Mexico, New York, and Brazil, and then again in Mexico, where he died.