Born in Winnipeg, Manitoba, Canada, and the child of two teachers, Paquin moved to New Zealand when she was four. Her debut performance, in the 1993 film The Piano, which was widely praised by critics, earned her an Academy Award for Best Supporting Actress at the age of eleven, making her the second-youngest Oscar winner in history (the youngest is Tatum O'Neal).

While in New Zealand she attended Hutt Intermediate School (an intermediate school in Lower Hutt) from 1994-1995, where she completed Form 1 and 2 (Year 7 and 8). Having begun her secondary education in Wellington, New Zealand, she completed her high school diploma in Los Angeles, where she moved with her mother following her parents' divorce, and took several well-regarded roles in various movies while doing so. She studied at Columbia University for one year, but has since been on a leave of absence in order to continue her acting career.

She returned to worldwide prominence with her role as Rogue in the blockbuster X-Men movie in 2000, its sequel X2: X-Men United in 2003, and its third installment X-Men: The Last Stand in 2006. She lives in New York City.

In 2002, she appeared on the West End stage in a production of This is Our Youth.