Chatterjee was born in Pune, Maharashtra 23 November 1980, to a Bengali Hindu family. Her father was a business executive and her mother was a political science professor. Her family traveled and lived out of the country for some time and then moved to Delhi. She majored in Chemistry at Delhi University and then went to the National School of Drama. Thereafter she worked in India and Europe with well-known theatre directors.

Chatterjee's performance in the German film, Shadows of Time earned her critical acclaim. It took her to international film festivals like Toronto and Berlin. Thereafter she worked on an Indo-French coproduction Hava Aney Dey (Let the Wind Blow) directed by Partho Sen-Gupta which premiered at the Berlin International Film Festival and won the best film award at the Durban International Film Festival among others. Following these, Chatterjee acted in films like Strings, Kasturi and Bibar. The Bengali film Bibar won her critical acclaim and best actress awards. Her work in the British film Brick Lane directed by Sarah Gavron gave her international exposure and recognition. Chatterjee was nominated for the British independent film awards along with actresses like Judi Dench and Anne Hathaway.

Chatterjee played a major role in Bhopal: Prayer for Rain in which she starred with Martin Sheen. She was the lead in Road, Movie with Abhay Deol. Chatterjee is often referred by the Indian media as the Princess of Parallel Cinema. Chatterjee was referred by the Indian media as the chief flag bearer at the 62nd Cannes Film Festival. She won the best actress award at the Miaac New York Film Festival for her film Bombay Summer. Referred to as one of the most international of Indian actors, she is the lead in Lucy Liu's film based on the book Half the Sky.

A trained Hindustani classical vocalist, she sang for movies like Road, Page 3, and her own films. She sang at the Royal Opera House in London with well-known British composer Jocelyn Pook.

Chatterjee was in the jury of the 2010 Asia Pacific Screen Awards. She appeared in a T series film I Love New Year opposite Sunny Deol directed by Radhika Rao and Vinay Sapru.^[13] Tannishtha appeared in Joe Wright's film Anna Karenina (2012). Her film Dekh Indian Circus won the audiences choice award in Busan International Film Festival. She won the National Film Award for the same film amongst other awards. She is also featured in a major role in Gulab Gang , a film starring Madhuri Dixit. Her film Monsoon Shootout was in official selection at the 66th Cannes film festival.^[14] Her Canadian film Siddharth was in official selection at the 70th Venice Film Festival and the 2013 Toronto International Film Festival. She is the only Indian actress whose films have been selected in three of the major international film festivals in the same year.^[15] Her other notable projects are "Parched" directed by Leena Yadav which opened in Toronto, Australian romantic comedy "Unindian" with Brett Lee^[16] "Island city" which won the best debut director( Ruchika Oberoi) in Venice and Garth Davies's film LION co-starring Nicole Kidman and Dev Patel.^[17] Her film Angry Indian Goddesses received huge acclaim in Toronto and Rome international film festivals. In March 2016 Tannishtha was given a special award in a ceremony held at the BAFTA sponsored by MasterCard and London Asian Film festival( Tongues On Fire) for her contribution to Asian Cinema.^[18] She won the best actress for the film Parched along with 3 other actresses in Festival2valenciennes and Indian Film Festival of Los Angeles 2016.^[19] She was the president of the jury of the prestigious MOOOV film festival in Belgium in 2016.^[20] She won the best actress at the Pune International Film festival 2017 for her role in Dr. Rakhmabai.^[21]