Fanning was born in Conyers, Georgia, the daughter of Joy (née Arrington), who played tennis professionally, and Steve J. Fanning, who played minor league baseball for the St. Louis Cardinals and now works as an electronics salesman in Los Angeles. Her maternal grandfather is football player Rick Arrington and her aunt is ESPN reporter Jill Arrington. Fanning is the younger sister of Dakota Fanning, also an actress. She goes by her middle name "Elle" just like her older sister. Fanning is of half German descent and her last name is of Irish origin. She and her family are members of the Southern Baptist Convention. She goes to a private Episcopal school near Studio City, Los Angeles along with Sister Dakota. She had been home-schooled all her life until 2007, but started school recently. She was quoted as saying "We're just normal sisters. We both go to school and we just play together."

Fanning began her acting career by playing the younger version of her older sister Dakota's characters in both the mini series, Taken and the movie, I am Sam. In 2002, at the age of four, Fanning won her first role independent of her sister, in the comedy Daddy Day Care. In 2003, Fanning filmed The Door in the Floor opposite Jeff Bridges and Kim Basinger. Anecdotal evidence of her young skill was seen in the decision to cast her in the role of Ruth in The Door in the Floor. The film's producers had originally planned to hire identical twins for the intense shooting schedule, but were so impressed with Fanning that they used only her. Late in 2003, Fanning filmed Because of Winn Dixie in the small role of Sweetie Pie Thomas. In 2004, Fanning filmed I Want Someone To Eat Cheese With. In early 2005, Fanning filmed scenes in Charlotte's Web as the "future granddaughter" of Fern Arable played by Dakota Fanning. However, the scenes didn't make the final cut. In mid 2005, Fanning played Debbie, the daughter of Brad Pitt and Cate Blanchett in the Academy Award-winning film Babel. In early 2006, Fanning filmed scenes in both The Nines and Déjà Vu. In mid 2006 she filmed The Lost Room a sci-fi TV mini-series.

By the end of 2006, Fanning began to book lead roles. Her first being in Reservation Road playing Emma Learner, the grieving daughter of Joaquin Phoenix and Jennifer Connelly. The film deals with the aftermath of a tragic car accident in which Emma's brother is killed. Early in 2007, she had a small part in The Curious Case of Benjamin Button as a younger version of Cate Blanchett's character (as opposed to Babel where Fanning played her daughter). Mid-year 2007, Fanning filmed Phoebe in Wonderland as the title role Phoebe. It is the fantastical tale of a little girl who won't - or can't - follow the rules. It also stars Felicity Huffman and is expected to be released in 2009. From July to October 2007, Fanning filmed The Nutcracker - The Untold Story playing Mary. Set in 1920's Vienna, this is a tale of a little girl whose godfather gives her a special doll one Christmas Eve. Fanning filmed this movie in Budapest, Hungary. It is expected to be released late 2009. In March 2008, Elle Fanning and her sister Dakota were scheduled to star in My Sister's Keeper, but the opportunity fell through when Dakota learned she would have to shave her head. They were immediately replaced by Abigail Breslin and Sofia Vassilieva. She has also done voice acting in the Japanese anime film My Neighbor Totoro.