In 1921 Larsen worked nights and weekends as a volunteer with librarian Ernestine Rose, to help prepare for the first exhibit of "Negro art" at the New York Public Library (NYPL). Encouraged by Rose, she became the first black woman to graduate from the NYPL Library School, which was run by Columbia University and opened the way for integration.
Larsen passed her certification exam in 1923 and spent her first year working at the Seward Park Branch on the Lower East Side, which was predominantly Jewish, where she had strong support from her white supervisor Alice Keats O'Connor, as she had from Rose. They, and another branch supervisor where she worked, supported Larsen and helped integrate the staff of the branches. Larsen transferred to the Harlem branch, as she was interested in the cultural excitement in the neighborhood.
In October 1925, Larsen took a sabbatical from her job for health reasons and began to write her first novel. In 1926, having made friends with important figures in the Negro Awakening (which became known as the Harlem Renaissance), Larsen gave up her work as a librarian.
She became a writer active in Harlem's interracial literary and arts community, where she became friends with Carl Van Vechten, a white photographer and writer. In 1928, Larsen published Quicksand, a largely autobiographical novel. It received significant critical acclaim, if not great financial success.
In 1929, she published Passing her second novel, which was also critically successful. It dealt with issues related to two mixed-race African-American women who were childhood companions and had taken different paths of racial identification and marriage. One married a black doctor and the other married a white man, without revealing her African ancestry. The book explored their experiences of coming together again as adults.
In 1930, Larsen published "Sanctuary", a short story for which she was accused of plagiarism. "Sanctuary" was said to resemble the British writer Sheila Kaye-Smith’s short story, "Mrs. Adis", first published in the United Kingdom in 1919. Kaye-Smith wrote on rural themes, and was very popular in the US. Some critics thought the basic plot of "Sanctuary," and some of the descriptions and dialogue, were virtually identical to Kaye-Smith's work.
The scholar H. Pearce has taken issue with this assessment, writing that, compared to Kaye-Smith’s tale, "Sanctuary" is '... longer, better written and more explicitly political, specifically around issues of race - rather than class as in "Mrs Adis" ." Pearce thinks that Larsen reworked and updated the tale into a modern American black context. Pearce also notes that in her 1956 book, All the Books of My Life, Kaye-Smith said she had based "Mrs Adis" on a 17th-century story by St Francis de Sales, Catholic bishop of Geneva. It is unknown whether she knew of the Larsen controversy.
No plagiarism charges were proved. Larsen received a Guggenheim Fellowship in the aftermath of the controversy. She used it to travel to Europe for several years, spending time in Mallorca and Paris, where she worked on a novel about a love triangle, in which all the protagonists were white. She never published this book or any other works.
Larsen returned to New York in 1933, when her divorce had been completed. She lived on alimony until her ex-husband's death in 1942. Struggling with depression, Larsen was not writing (and never would again). After her ex-husband's death, Larsen returned to nursing and became an administrator. She disappeared from literary circles. She lived on the Lower East Side, and did not venture to Harlem.
Many of her old acquaintances speculated that she, like some of the characters in her fiction, had crossed the color line to "pass" into the white community. The biographer George Hutchinson has demonstrated in his 2006 work that she remained in New York, working as a nurse. She avoided contact with her earlier friends and world.
Larsen died in her Brooklyn apartment in 1964, at the age of 72.