Rani Mukerji was born on  21 March 1978 in Mumbai. Her father, Ram Mukherjee (born to the Mukherjee-Samarth family), is a former film director and one of the founders of Filmalaya Studios. Her mother, Krishna Mukherjee, is a former playback singer.  Her elder brother, Raja Mukherjee, is a film producer and director. Her maternal aunt, Debashree Roy, is a Bengali film actress and her paternal cousin, Kajol, is a Hindi film actress and her contemporary. Another paternal cousin, Ayan Mukerji, is a scriptwriter and film director Despite her parents and most of her relatives being members of the Indian film industry, Mukerji was uninterested in pursuing a career in film. She said, "There were already too many actresses at home and I wanted to be someone different". She received her education at Maneckji Cooper High School in Juhu and graduated with a degree in Home Science from SNDT Women's University.  She is a trained Odissi dancer and began learning the dance form while in the tenth grade. As part of an annual tradition, the Mukherjee family celebrates the festival of Durga Puja in the suburban of Santacruz every year. Mukerji, a practicing Hindu, takes part in the festivities with her entire family. On 21 April 2014, she married Chopra at a private ceremony in Italy. On 9 December 2015, she gave birth to their daughter, named Adira.

In 1994, director Salim Khan approached her to play the lead female role in his directorial, Aa Gale Lag Jaa. Her father disapproved of a full-time career in film at such a young age, so she rejected the offer. At the age of eighteen, Mukerji experimented with acting by portraying a supporting role in her father's Bengali language film Biyer Phool (1996). The film starred Prosenjit and Indrani Haldar in lead roles and narrates the story of two sisters; Mukerji played the younger sibling of Haldar's character. Soon after, Khan approached her with another film offer to play the protagonist of the social drama Raja Ki Aayegi Baraat, Mukerji accepted the role due to her mother's insistence that she continues to pursue acting on an experimental basis. Mukerji portrayed a rape victim who is forced to marry her rapist in Raja Ki Aayegi Baraat, which released in 1997. Although the film was a commercial failure, Mukerji's performance was praised, and she won a special recognition trophy at the annual Screen Awards ceremony. Before she began work on the film, Mukerji trained at Roshan Taneja's acting institute.

The year 2004 marked the beginning of the most successful period in Mukerji's career. At the 50th Filmfare Awards in 2005, Mukerji won both the Best Actress and Best Supporting Actress awards, becoming the only actress to win both awards in the same year.

Alongside her acting career, Mukerji has been actively involved with several humanitarian causes and is vocal about issues faced by women and children. Mukerji was appointed as an ambassador by Procter & Gamble and the NGO Child Rights and You for their joint venture, Shiksha, to endorse the cause of children's education. In 2011 she set up a Stroke Treatment Fund, in association with the Indian Stroke Association, to pay for the treatment of financially deprived stroke-affected patients.

Mukerji has made public appearances to support other charities and causes. In March 2004, she visited the Indian army unit in Pokhran, Rajasthan to interact with the jawan troops, for the NDTV reality show Jai Jawan.  A decade later, in August 2014 she visited the jawans again at Baramulla. In February 2005, Mukerji and several other Bollywood actors participated in the 2005 HELP! Telethon Concert to raise money for the victims of the 2004 Indian Ocean earthquake. In March 2006, Mukerji celebrated her birthday with the physically challenged children of the Helen Keller Institute; she had previously worked with them while preparing for her role in Black. In November 2010, she was part of a fundraising auction for the "Because I am a Girl" charity campaign. In 2014, Mukerji attended a charity dinner on child abuse in London, where she was felicitated by Prince Charles for raising awareness on the issue through her work in Mardaani.

She has participated in several concert tours and televised award ceremonies. Her first concert tour, "Magnificent Five", was in 1999 in which she performed with actors Aamir Khan, Aishwarya Rai, Akshaye Khanna and Twinkle Khanna. The "Temptations 2004" concert had Mukerji perform alongside Shah Rukh Khan, Saif Ali Khan, Preity Zinta, Arjun Rampal and Priyanka Chopra in nineteen stage shows worldwide.

At the peak of her career Mukerji was frequently referred to as one of the most popular and attractive Indian celebrities, was one of the highest-paid actresses in Bollywood, and the brand ambassador for a number of products.

Filmfare featured her in their listing of the "Ten Most Powerful Names of Bollywood" for two consecutive years (2005–2006). In 2006, Eastern Eye ranked her as one of "Asia's Sexiest Women". She ranked first on Box Office India's '"Top Actresses" listing for two consecutive years (2005–2006).  She topped Rediff.com's annual listing of the "Top Bollywood Actresses" for three consecutive years (2004–2006); in 2007, she held the fifth position. She was also featured by Rediff.com in their listing of "Bollywood's Best Actresses Ever", "Bollywood's Most Beautiful Actresses", and "Bollywood's Best Dressed Women". In 2013, the American Embassy in India honored her with a special trophy for her contributions to Indian cinema. In October 2017, Mukerji was honored with the "Outstanding Contribution to Cinema Award" by the Government of Mauritius.