She grew up with four brothers. Her brother Gustav Hedberg later also became an actor. Her father had studied organ building and music in Leipzig. Through the influence of her German nanny and her German piano teacher, she was familiar with German language and culture from an early age. From 1911 she received lessons in violin and piano and in 1913, at the age of 6, she performed at a Chopin competition. She attended high school until 1922, where she perfected her German. In 1926 Leander married the actor Nils Leander, with whom she had two children and from whom she separated again in 1932. Her second marriage was from 1932 to the journalist Vidar Forsell, who separated from her in 1948. In 1929 she made her debut as a chanson singer at a Swedish traveling theater without any singing or acting training. Her career accelerated rapidly and just a few months later Leander appeared in the revue "The Cheerful Stockholm" and her first film role in "Dante's Mysteries".

She signed a contract with the Swedish record company "Odeon" and recorded 80 songs for them by 1936. She celebrated her first successes with titles like "I don't know why I do it". From 1929 to 1935, Zarah Leander took part in numerous revues with Karl Gerhard and made three feature films in Sweden. She then played in Franz Lehár's "The Merry Widow" and had a role in the film "The False Millionaire". She moved to Vienna in 1935, where she played in the operetta "Axel at Heaven's Door" and got a leading role in the Austrian crime film "Premiere". Due to the success, Leander signed a contract with "Universum Film AG". Ufa's goal was to build Zarah Leander as a global star in competition with Marlene Dietrich and Greta Garbo. Between 1937 and 1942 Leander made ten Ufa films, including "A lavish Ball Night" and "The Heart of a Queen".

Leander was stylized as a "femme fatale" and became one of the most popular and expensive stars in Ufa. In her films, mostly melodramas, she often embodied a beautiful, passionate and self-confident woman. The actress became the most famous melodramatist in German film under National Socialist rule. Without any political ambitions of her own, she also took part in propaganda films such as "Heimat" (1938). Zarah Leander also released the songs from her films on records. Titles such as "Can love be a sin" or "I know, a miracle will happen one day" were recorded in several languages and achieved success around the world. In 1943, Leander ended her contract with Ufa, left Germany and went back to her home country of Sweden, where she retired to her Lönö estate. After the Second World War, Zarah Leander was banned from performing in Germany and Austria until 1948 because of her career under the National Socialists.

Leander continued to sing in Sweden and then again in Germany. In the 1950s she also played film roles in Germany again, including in "Gabriela" and "The Blue Moth", with which she was unable to build on her earlier successes. Zarah Leander married the bandmaster Arne Hülphers for the third time in 1956. Two years later she made her big stage comeback with the leading role in "Madame scandaleuse" in Vienna, Munich, Berlin and Hamburg. She toured the world with her concerts in the 1960s, took on musical roles in Vienna and Berlin and published her autobiography in 1972 under the title "It was so wonderful. My life". She undertook a final tour of the USA in 1973. In 1978, the actress suffered a stroke during a performance in Stockholm, which put an end to her stage career.