Born in Bruneck-Brunico but resident for his whole life in Rome, he is known for his films Caro diario (Dear Diary, 1993; followed in 1998 by a sequel, Aprile) and La stanza del figlio (The Son's Room, 2001), the latter of which won the 2001 Palme d'Or at the Cannes Film Festival.
His other work has not been widely seen outside Europe, but within his country Moretti is well known as a maker of wryly humorous and eccentric films, usually starring himself—qualities for which he has been called "the Italian Woody Allen."
Moretti played waterpolo in the B division of the Italian championship. His experience later inspired his film Palombella Rossa ("palombella," which literally means "little pigeon," refers to a type of lob shot).
Moretti is also an outspoken political leftist: in 2002 he organized massive street protests against the government of Silvio Berlusconi. Il caimano (2006) is in part about Berlusconi's controversies: in one of the three portraits of the Italian prime minister Moretti himself plays Berlusconi.
He lives in Rome, where he is co-owner of a small movie theater, Nuovo Sacher. The short film, Il Giorno della prima di Close Up (Opening Day of Close-Up, 1996), shows Moretti at his theatre attempting to encourage patrons to attend the opening day of Abbas Kiarostami's film, Close Up.
His brother is literary scholar Franco Moretti.