Kaysen was born and raised in Cambridge, Massachusetts. She is the daughter of Annette (Neutra) and economist Carl Kaysen, a professor at MIT and former advisor to President John F. Kennedy. Her family is Jewish.
Kaysen attended high school at the Commonwealth School in Boston, and The Cambridge School of Weston, before being sent to McLean Hospital in 1967 to undergo psychiatric treatment for depression. While there, she was diagnosed with borderline personality disorder. She was released after 18 months. She drew on this experience for her memoir Girl, Interrupted in 1993, which was adapted into a film; she was portrayed by actress Winona Ryder.
Kaysen has one sister and is divorced. She lived for a time in the Faroe Islands, upon which experience her novel Far Afield is based.

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