Rati Agnihotri was born on December 10, 1960 to a Punjabi family in Bombay, India. Although, she came from a traditional, conservative family, she was allowed to model at age 10. When she was a teenager, her father relocated the family to Madras, Tamil Nadu because of his job. There, she attended Good Shepherd's Convent school and acted in a school play. Bharati Raja, one of Tamil Nadu's famous film director, was in the audience and was on the lookout for a heroine to star in his new film. He met with Rati's father and promised the film would wrap in a month. Her father reluctantly agreed, and a sixteen-year-old Rati was very excited to star in her first film, Pudhiya Varpukal (1979). It was also her hero Bhagyaraj's first film, and he coached her with her lines by teaching her Tamil. The film became a blockbuster, with Rati an overnight sensation. Bharati Raja soon directed her in her second film, Neeram Maradapukal (1979). Even though she was Punjabi, South Indian audiences embraced her as if she was truly one of their own, and she reciprocated the feeling by calling herself "Tamilian at heart" and calling Madras her "home." She also starred in Telugu and Kannada films and made 32 films in just three years. She worked with big banners and top stars, such as Kamal Haasan, Rajinikanth, Shobhan Babu, Chiranjeevi, Vishnuvardhan, N T Rama Rao and Nageshwara Rao. Ironically, her entry into Hindu films came from her strong connection to South Indian cinema. She had worked with director K. Balanchander once before and had been Kamal Haasan's leading lady in many South Indian films, so she wasn't surprised when they approached her for the Hindi remake of their Telugu blockbuster, Marocharithra (1979). Now re-titled "Ek Duje Ke Liye" (1981), the film was about passionate lovers who are torn apart by their parents in the storytelling tradition of Romeo and Juliet. It became the top grossing hit of 1981 and marked the debut into Hindi films of 5 stars of the South Indian film industry: director K. Balachander, hero Kamal Haasan, heroine Rati Agnihotri, supporting actress Madhavi, and playback singer S.P. Balasubramaniam. Although all received Filmfare nominations, only Rati and S.P. Balasubramaniam were the real beneficiaries, both becoming top stars in their field. The unforgettable musical score by Laxmikant-Pyarelal rose the film to soaring heights, and there were rumors about how the film's love story about tragic lovers inspired real life lovers to take their own lives. Rati's father, who was also managing her career, shielded her from the hysteria as she was still so young. He effectively kept her starring in only Hindi films after Ek Duje Ke Liye, and she ended the decade starring in over 43 Hindi films. Her biggest hits were Shaukeen (1982), Farz Aur Kanoon (1982), Coolie (1983), and Tawaif (1985) for which she received her second Filmfare nomination as Best Actress.Her father's death along with her marriage to businessman and architect Anil Virwani on February 9, 1985 convinced Rati to leave Hindi films when she was still at the top. In 1987, her only son Tanuj was born, and she concentrated on raising him and focusing on other creative interests, such as designing her husband's architectural creations. She also received a degree in Reike, where she distantly heals people. Even though she retired from films, she would still appear at film events looking beautiful and glamorous, and as a result, the film offers kept coming in. After 16 years of saying no, she finally said yes realizing that her son is growing up and she had more time for herself. Her family supported her decision. She returned to films by playing Kajol's glamorous mother in Kuch Khatti Kuch Meethi (2001). More film offers came in, and she took them, such as Yaadein (2001) and Dev (2004). After a 20-year absence from South Indian films, she returned to the South in the Tamil film Majnu (2001). She also made her Malayalam debut in Anyar (2003) and English debut in An Ode to Lost Love (2003). She also has acted on stage in plays such as "Please Divorce Me Darling" (2005) and television serials, such as Sixer (2005). She still keeps up with supporting her husband's architectural creations and devotes time to social causes like cancer, AIDS and menopause awareness for 40 plus women.

When Rati married businessman and architect Anil Virwani in February 1985, she gave up films for 16 years and came back after her teenage son Tanuj encouraged her to do so.

She is Punjabi but settled in Madras, Tamil Nadu when she was a teenager because her father's job took them there.

When Rati was just 16 years old, director Bharati Raja saw her in a school play and cast her as the heroine in the Tamil film "Pudhiya Varpukkal" (1979), which made her an overnight star in South Indian films.

She didn't know the Tamil language, so her leading man on her first film, Bhagyaraj, wrote the dialogues for her in Hindi and would explain them to her in English, and she spoke the lines in Tamil. She quickly learned the language and can now speak in near perfect Tamil, and later Telugu and Kannada as well.

After doing South Indian films (Tamil, Telugu, and Kannada), she became a star in Hindi films with her first Hindi film "Ek Duje Ke Liye" (1981), which ironically, was a remake of a Telugu blockbuster "Maro Charitra" (1979) starring a different heroine (Saritha) but same director (K. Balachander), hero (Kamal Hassan), supporting actress (Madhavi).

She has acted in six languages (Hindi, English, Tamil, Telugu, Kannada, and Malayalam) and has acted in over 150 feature films, theatrical plays, and television serials.

In her heyday as a South Indian heroine from 1979-1981, she starred in Tamil, Telugu, and Kannada films but didn't have time to act in Malayalam films. She finally made her debut in a Malayalam film in a mature, supporting role in Anyar (2003).

Her cousin is actor-filmmaker Atul Agnihotri, and she played a supporting role as a cardiac surgeon in his film "Dil Ne Jise Apna Kahaa" (2004).

In 2005, she made her music video debut by playing a doting mother of a young man in love with a coed in Kumar Sanu's non-film album "Aisa Na Dekho Mujhe.".