She was born in Randolph, Massachusetts, and attended Mount Holyoke College (then, Mount Holyoke Female Seminary) in South Hadley, Massachusetts, for one year, from 1870–71. Freeman's parents were orthodox Congregationalists, causing her to have a very strict childhood. Religious constraints play a key role in some of her works. She later finished her education at West Brattleboro Seminary. She passed the greater part of her life in Massachusetts and Vermont.
Freeman began writing stories and verse for children while still a teenager to help support her family and was quickly successful. While working as secretary to the author and physician, Oliver Wendell Holmes, Sr., she began writing poetry and novels with a strong New England regional flavor. When the supernatural caught her interest, the result was a group of short stories which combined domestic realism with supernaturalism and these have proved very influential. Her best known work was written in the 1880s and 1890s while she lived in Randolph. She produced more than two dozen volumes of published short stories and novels. She is best known for two collections of stories, A Humble Romance and Other Stories (1887) and A New England Nun and Other Stories (1891). Her stories deal mostly with New England life and are among the best of their kind. Freeman is also remembered for her novel Pembroke (1894), and she contributed a notable chapter to the collaborative novel The Whole Family (1908). In 1902 she married Dr. Charles M. Freeman of Metuchen, New Jersey.
In April 1926, Freeman became the first recipient of the William Dean Howells Medal for Distinction in Fiction from the American Academy of Arts and Letters. She died in Metuchen and was interred in Hillside Cemetery in Scotch Plains, New Jersey.