Dorothy Jeanne Thompson was born on August 6, 1932, in Detroit, and grew up in the Paradise Valley and Black Bottom neighborhoods. Her father, Wiley Thompson, was a self-taught jazz guitarist who often brought other musicians home, and as a girl she backed them on piano. At Cass Technical High School, where Donald Byrd and Kenny Burrell also studied, she tried the saxophone and string bass before her father and her piano teacher steered her to the harp. Her harp teacher was Velma Froude, who schooled her in the strict classical technique of the French harpist Carlos Salzedo and who later taught Alice McLeod, the future Alice Coltrane. At seventeen she entered Wayne State University in Detroit, majoring in piano and music education.

After graduating she worked as a pianist on the Detroit jazz scene, but by 1952 the harp was her main instrument. Other musicians resisted it, hearing it as a classical, somewhat ethereal sound that did not belong in a jazz group, and she answered by organizing free concerts and playing dances and weddings with her trio, which included her husband, John Ashby, on drums. The trio toured the country, and through the 1960s she also hosted a radio show in Detroit, sometimes performing on it with her husband. In 1967 a Detroit public-schools music director, Robert H. Klotman, cited her and the harp and vocal ensemble at Cass Tech as the inspiration for placing ten harps in five inner-city schools. Biographies also say she performed with Louis Armstrong and Woody Herman.

Her debut album, The Jazz Harpist (Regent, 1957), paired her with Frank Wess on flute, bassists Eddie Jones and Wendell Marshall, and drummer Ed Thigpen, and mixed standards such as "Thou Swell" and "Stella by Starlight" with her own pieces "Aeolian Groove," "Lamentation," and "Spicy." Two more albums with Wess followed in 1958 for Prestige and its New Jazz imprint, Hip Harp (with bassist Herman Wright and drummer Art Taylor) and In a Minor Groove (with Wright and drummer Roy Haynes), all three engineered by Rudy Van Gelder. Soft Winds: The Swinging Harp of Dorothy Ashby, recorded for Jazzland in New York on August 15 and 16, 1961, added Jimmy Cobb on drums and Terry Pollard on vibraphone, and she cut a trio album for Argo in 1962, the year Down Beat's critics' and readers' polls honored her. The Fantastic Jazz Harp of Dorothy Ashby (Atlantic, 1965) used bassist Richard Davis, drummer Grady Tate, percussionist Willie Bobo, and four trombones. In a 1983 interview she described the combination of being a woman, being Black, and playing the harp as a triple burden: the audiences she wanted to reach were not interested in the instrument, or in seeing a Black woman play it.

In the late 1960s she moved toward soul and rhythm and blues, working with the Chicago arranger and producer Richard Evans for Cadet. Afro-Harping (recorded in February 1968 at Ter-Mar Studios in Chicago), Dorothy's Harp (March 1969), and The Rubáiyát of Dorothy Ashby (recorded from November 1969 into January 1970, with music inspired by Omar Khayyam's verse) set her harp against string and horn arrangements and funk rhythms, and on the last album she also played the koto and sang. In the 1960s she and John Ashby founded the Ashby Players, a Detroit company that staged plays relevant to the city's African-American community, in Detroit and in Canada; John wrote the scripts, she composed the scores and played harp and piano on the soundtracks, and the actor Ernie Hudson had an early role in the production 3-6-9. She later made recordings and gave concerts mainly to raise money for the company.

Around 1970 the Ashbys gave up touring and settled in California. Her studio career there began, as biographies tell it, when Bill Withers recommended her to Stevie Wonder. She played harp on Withers's +'Justments (1974), on Bobbi Humphrey's Fancy Dancer (recorded in August 1975), on Minnie Riperton's Adventures in Paradise (1975), on Stanley Turrentine's Everybody Come On Out (1976), and on Wonder's Songs in the Key of Life (1976), where her harp is the other voice in the duet "If It's Magic." Her later sessions included dates for Wade Marcus, Earth, Wind & Fire, Johnny Hammond, Sonny Criss, Freddie Hubbard, and Bobby Womack. In 1983 and 1984 she made two solo harp albums of standards and film themes for the Japanese label Philips, Concierto de Aranjuez and Django/Misty, the first recorded in Hollywood on March 7 and 8, 1983. She passed away from cancer at her home in Santa Monica on April 13, 1986, at age 53, and her ashes were scattered over Santa Monica Bay.

Ashby established the harp as an improvising jazz instrument rather than a novelty or a bed of orchestral color, and showed that it could play bebop lines as fluently as a saxophone or piano. Her small-group records of the late 1950s favored a flute-and-harp front line with Frank Wess, a pairing with almost no precedent, and her own writing ran through those albums beside the standards. From the mid-1960s she widened the range: Brazilian songs such as "Reza" and "Canto de Ossanha" on Dorothy's Harp, African percussion and soul arrangements on Afro-Harping, and the koto, voice, and Middle Eastern color of The Rubáiyát of Dorothy Ashby. AllMusic's Ron Wynn called Afro-Harping her best and most complete album, and Thom Jurek wrote that the Rubáiyát may be her greatest moment on record. Her contemporary Alice Coltrane took the harp further into spiritual jazz, and Alice Coltrane's own profile notes that her harp vocabulary had almost no precedent outside Ashby's work. Ashby's records have been sampled widely in hip-hop, by Pete Rock, Jay-Z, J Dilla, Madlib, and others, and Drake built a 2018 track on her version of "The Windmills of Your Mind." The harpist Brandee Younger has recorded her own version of "Afro-Harping."