Chatterjee was born in Pune, India to a business executive and a political science professor. Her family later 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.
Her first film Swaraj won a National Film Award. 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 did an Indo-French film, Let the Wind Blow, also called Hava Aney Dey. The film was directed by Partho Sen-Gupta and won in the Best film Award at the Durban International Film Festival. Following these, Chatterjee acted in various 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 will be appearing opposite Martin Sheen in Ravi Kumar?s upcoming film, Bhopal: Prayer for Rain. She will also be seen 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. Also referred to as one of the most international of Indian actresses Chatterjee is working with Lucy Liu in a film based on the book Half the Sky.
A trained Hindustani classical vocalist, she also sang for movies like Road, Page 3, and her own films.