Chandra was born in Kangra in Punjab, British India (now in Himachal Pradesh). As used to be the case in old Punjab, his early education was in Urdu, he was best at home in his early years with an Urdu novel by his side. He graduated from Forman Christian College, Lahore in 1946 after which the Partition forced him to leave. Thereafter he went to the United States where he studied at the Stanford University, California, United States, to complete his graduation and post-graduation. He then went to do his graduation and post graduation at Stanford University, California (1948–49). Later he completed his Ph.D from Delhi University in 1963. He established contact with Communists there, and, caught in the net cast under Senator McCarthy’s anti-Communist crusade, he was deported to India. Back in Delhi in the early 1950s, Bipan Chandra was appointed lecturer in History at the Hindu College, Delhi.
Chandra taught for many years as lecturer and then as reader at Hindu College, Delhi. He became professor of History at Jawaharlal Nehru University, New Delhi, soon after the university was founded and after retirement was appointed as an emeritus professor there. He founded the journal Enquiry and was a member of its editorial board for a long time.Chandra was a sectional president and then the general president of the Indian History Congress in 1985. He was chairperson of the Centre for Historical Studies, Jawaharlal Nehru University, New Delhi. He became a member of the University Grants Commission in 1993. He was the chairman of the National Book Trust, New Delhi from 2004 to 2012. As Chairman of National Book Trust, India, he started many new series such as Popular Social Science, Autobiography, Afro-Asian Countries series, Indian Diaspora Studies etc.
Chandra was at the forefront of the communist movement in India since independence. His co-authored book, Freedom Struggle, was censored by the new central government that came to power in India in 1977. He collaborated with historians such Nurul Hasan, Ram Sharan Sharma, Sarvapalli Gopal, Satish Chandra, Romila Thapar, Irfan Habib, Barun De and Arjun Dev and some of his students, such as Mridula Mukherjee, Aditya Mukherjee, Sucheta Mahajan and Vishalakshi Menon, some of whose textbooks have previously been prescribed in the history syllabi of schools in India.In April 2016, right-wing activist Dinanath Batra sought a ban on Chandra's bestselling India's Struggle for Independence because of a misunderstanding of the terminology used in it.
Chandra died on 30 August 2014, at his home in Gurgaon, after prolonged illness, aged 86. JNU organised a commemorative event on his birth anniversary.