Margit Carstensen was born in Kiel on February 29, 1940. From 1958 on, she studied acting in Hamburg, and after making her stage debut in Kleve, she performed in theatres in Heilbronn, Münster and Braunschweig. From 1965 until 1969, she was a company player at the Schauspielhaus in Hamburg, where she got rave reviews, for instance for her performances in plays by John Osborne and Lope de Vega. In 1969, Carstensen joined the theatre in Bremen for four years, followed by her engagement at the Staatstheater in Darmstadt (1973-1976). After more residencies in Hamburg, Berlin and Stuttgart, she joined the ensemble of the Schauspielhaus in Bochum in 1995 and remained with the theatre until 2006. In addition to this, she performed as a guest player at other theatres, including the Kammerspiele in Munich and the Burgtheater in Vienna. During the course of her long stage career, Carstensen worked with many prolific directors like Leander Haußmann and Christoph Schlingensief. In 2011, she starred in René Pollesch's acclaimed production of his play "Schmeiß Dein Ego weg" at the Volksbühne in Berlin.

Margit Carstensen was introduced to film by Rainer Werner Fassbinder, whom she met during her stint in Bremen. Under his direction, she made her screen debut in a televised production of Carlo Goldoni's play "Das Kaffeehaus". During the following years, she became Fassbinder's preferred female lead. She was awarded the "Filmband in Gold" for her performance in "Die bitteren Tränen der Petra von Kant" ("The Bitter Tears of Petra von Kant", 1972), and also had leading roles in Fassbinder's "Martha" (1974), "Nora Helmer" (1974), "Mutter Küsters' Fahrt zum Himmel" ("Mother Kusters Goes to Heaven", 1975), "Angst vor der Angst" ("Fear of Fear", 1975, TV), "Satansbraten" ("Satan's Brew", 1976) "Chinesisches Roulette" ("Chinese Roulette", D/F 1976) and "Frauen in New York" ("Women in New York", 1977, TV). Moreover, she had supporting roles in "Die dritte Generation" ("The Third Generation", 1979) and Berlin Alexanderplatz" (1980, TV).

Overall, Carstensen and Fassbinder collaborated on sixteen film and movie productions. She also was one the leads in Ulli Lommel's "Die Zärtlichkeit der Wölfe" ("Tenderness of the Wolves", 1973) and played the character of Marlene Dietrich in Lommel's satire "Adolf und Marlene" ("Adolf and Marlene", 1976), which revolves around a fictitious encounter between the actress and the dictator.

Following Fassbinder's death in 1982, Carstensen re-focused on her successful stage career while her screen appearances became rarer and included small roles in Peter Zadek's "Die wilden Fünfziger" ("The Wild Fifties", 1983) and Agnieszka Holland's "Bittere Ernte" ("Angry Harvest", 1985). In the 1980s, she also began a long and fruitful creative collaboration with Christoph Schlingensief: Carstensen portrayed Martha Goebbels in Schlingensief's farce "100 Jahre Adolf Hitler – Die letzte Stunde im Führerbunker" ("100 Years of Adolf Hitler", 1989), starred in "Terror 2000 – Intensivstation Deutschland" (1992) and later played herself in "Die 120 Tage von Bottrop" (1997), Schlingensief's unique homage to Fassbinder. She also performed in Schlingensief's stage productions "Bambiland" (2003) and "Attabambi-Pornoland – Die Reise durchs Schwein" (2003) at the Volksbühne in Berlin.

Her other screen credits include a part in Nina Grosse's "Feuerreiter" ("Fire Rider", 1998), the delightful role of a rigid school headmistress in Leander Haußmann's comedy "Sonnenallee" ("Sun Alley", 1999), and a memorable turn as a stranded tourist in Romuald Karmakar's "Manila" (2000). Her performance as the alcoholic mother of a leukemia-stricken son in Chris Kraus's "Scherbentanz" ("Shattered Glass") became a late triumph, for which she won the 2002 Bavarian Film Award for Best Supporting Actress.

Despite this success, she only occasionally appeared in films afterwards. She played a supporting role in Oskar Roehler's "Agnes und seine Brüder" ("Agnes And His Brothers", 2004) and was one of the leads in the film essay "It Is Fine! Everything Is Fine." (USA 2007). In 2006 Detlev Buck cast her in his successful children's film "Hände weg von Mississippi" ("Hands Off Mississippi").

Margit Carstensen made her last appearance on the moviescreen in Frauke Finsterwalder's award-winning "Finsterworld" (2013), as an 85-year-old resident of an old people's home who develops a special relationship with her chiropodist.

On television, Carstensen was seen for the last time in the "Tatort" episode "Wofür es sich zu leben lohnt" (2016), as a member of an inscrutable senior living community. In a way, a circle was closed there, as the "Tatort"-commissioner was played by Eva Mattes, also one of the great Fassbinder actresses, with whom Carstensen had made five films at the time.

In 2019, Margit Carstensen was awarded the Götz-George-Prize for her life's work. On June 1, 2023, she passed away at the age of 83.