Bibi Andersson studied acting at the Terserus Drama School and at the legendary Royal Dramatic Theatre School in Stockholm. After completing school, she agreed to join the Royal Dramatic Theatre in Stockholm, which she remained a member of for 30 years. Her first collaboration with Ingmar Bergman was in 1951, when she participated in his production of an advertisement for the detergent "Bris". At the end of the 1950s she starred in two Bergman pictures, The Seventh Seal and Wild Strawberries.

Her intensive portrayal of the nurse Alma in the 1966 film Persona lead to an increase in the number of cinematic roles offered her. More Bergman collaborations followed, as well as working with John Huston (The Kremlin Letter: 1970) and Robert Altman (Quintet). She made her debute in American theatre in 1973 with a production of Erich Maria Remarque's "Full Circle". In 1990 she worked as a theatre director in Stockholm. In the late 1980s and early 1990s Andersson worked primarily in television and as a theatre actress, working with Bergman among others. She was also a supervisor for the humanitarian project Road to Sarajevo.

In 1996, she published her autobiography Ett ögonblick ("A Moment", or, literally, "A Blink of the Eye"). She has been married (1960, divorced) to the director Kjell Grede, and, secondly (1978, divorced), to the politician and writer Per Ahlmark. Since 29 May 2004, Andersson has been married to Gabriel Mora Baeza.