Araki was born in Los Angeles but grew up in Santa Barbara, California. He completed a Bachelor of Arts in Film Studies at UC Santa Barbara and an MFA in Film Production from the University of Southern California.

Araki made his directorial debut in 1987 with Three Bewildered People in the Night. With a budget of only $10,000 and using a stationary camera, he told the story of a romance between a video artist, her lover and her gay friend.

Two years later, Araki made a name for himself on the festival circuit with Long Weekend (o' Despair). Produced, directed, written, photographed and edited by Araki (for his own Desperate Pictures Company), this very small-scale Big Chill derivation involved a group of recent college graduates brooding over their futures during one woozy, boozy evening.

He followed this up in 1992 with The Living End, a road movie about two HIV-positive men whose paths cross one fateful day and the tumultuous relationship which ensues. The film starred Craig Gilmore and Mike Dytri, and featured Mary Woronov (who appeared in several of "underground" films by Andy Warhol) and cult favorite Paul Bartel. Premiering at the Sundance Film Festival, the film was nominated for the Grand Jury Prize.

Araki's next three films comprised his "Teenage Apocalypse Trilogy."

Totally Fucked Up (1993) (Totally F***ed Up in publicity), chronicled the dysfunctional lives of six gay adolescents who have formed a family unit and struggle to get along with each other and with life in the face of various major obstacles. Araki himself classified it as "A rag-tag story of the fag-and-dyke teen underground....A kinda cross between avant-garde experimental cinema and a queer John Hughes flick". The movie explored the youths' depression and homophobia.

The Doom Generation, was a black comedy brimming with graphic violence, cultural symbolism and relentless eroticism. The film starred Rose McGowan, Johnathon Schaech and James Duvall (who had starred in Totally Fucked Up), with cameos by indie favorite Parker Posey, comedienne Margaret Cho, 21 Jump Street actor Dustin Nguyen, The Brady Bunch star Christopher Knight, Hollywood madame Heidi Fleiss and musician Perry Farrell. While largely trashed by critics, the piece won a measure of respect in a number of circles and is available on DVD and VHS in both rated and unrated versions due to several intensely sexual scenes as well as the film's extremely violent climax.

Nowhere (1997), was described by its director as "A Beverly Hills 90210 episode on acid." It centered around a group of bored, alienated Los Angeles teenagers during a typical day of kinky sex, drugs, and the requisite wild party. Duvall, Rachel True, Nathan Bexton, Debi Mazar, Married With Children breakout Christina Applegate, Heather Graham, Ryan Phillippe, Baywatch heartthrob Jaason Simmons, Scott Caan and Mena Suvari starred in the film, with cameos by Beverly D'Angelo, Facts of Life star Charlotte Rae, porn star Traci Lords, Shannen Doherty, Rose McGowan, John Ritter and International Male and fitness model Brian Buzzini.

Araki's subsequent effort, the romantic comedy Splendor, told the story of a woman (Kathleen Robertson) who cannot choose between two men (Johnathon Schaech and Matt Keeslar) and so decides to live with them both. Splendor was both a response to the controversy surrounding his relationship with Robertson and an homage to screwball comedies of the 1940s and '50s. Hailed as the director's most optimistic film to date, it made its premiere at the 1999 Sundance Film Festival. The film itself however was considered to be a disappointment (and even a failure with some.) among Araki fans who felt that he sold out by making a more lighthearted piece and by dating Robertson. The two later broke up and Araki has since dated mainly members of the same sex.

Araki's next venture was the ill-fated MTV series This Is How the World Ends (2000), which was meant to have a budget of $1.5 million. The network only gave him $700,000 and hoped to find partners to finance the difference. Araki offered to make the pilot episode for $700,000, and MTV took him up on it. After the pilot was shot, however, it was not picked up for broadcast, there are however circulating the internet bootleg copies of the ill-fated mini series.

Following a short hiatus, Araki returned with the critically acclaimed Mysterious Skin (2005) based on a novel by Scott Heim, which tells the story of a teenage hustler and a withdrawn young man obsessed with alien abductions, and how they both deal with the sexual abuse they suffered from their Little League coach when they were children. With this movie Araki found critical acclaim and a generally good public reaction.

One consistent feature of Araki's work to date is the presence of music from the shoegazer genre as film soundtracks, first seen on Totally Fucked Up and heavily so on the films Nowhere and Mysterious Skin (even going so far as to employ Robin Guthrie to oversee the latter's score). Both The Living End and Nowhere are named after tracks by shoegazing bands (The Jesus and Mary Chain and Ride respectively).

At around this time, Araki began dating actress Kathleen Robertson, whom he had cast in Splendor; the relationship sparked a certain degree of controversy in the tabloid media and in the gay press, as Araki had previously defined himself in interviews as "queer", which many took to mean homosexual.