Æthelthryth was probably born in Exning, near Newmarket in Suffolk. She was one of the four saintly daughters of Anna of East Anglia, including Wendreda and Seaxburh of Ely, all of whom eventually retired from secular life and founded abbeys.
Æthelthryth made an early first marriage in around 652 to Tondberct, chief or prince of the South Gyrwe. She managed to persuade her husband to respect her vow of perpetual virginity that she had made prior to their marriage. Upon his death in 655, she retired to the Isle of Ely, which she had received from Tondberct as a morning gift.
Æthelthryth was subsequently remarried for political reasons in 660, this time to Ecgfrith of Northumbria. Shortly after his accession to the throne in 670, Æthelthryth became a nun. This step possibly led to Ecgfrith's long quarrel with Wilfrid, bishop of York. One account relates that while Ecgfrith initially agreed that Æthelthryth should continue to remain a virgin, in about 672 he wished to consummate their marriage and even attempted to bribe Wilfrid to use his influence on the queen to convince her. This tactic failed and the king tried to take his queen from the cloister by force. Æthelthryth then fled back to Ely with two faithful nuns and managed to evade capture, thanks in part to the miraculous rising of the tide. Another version of the legend related that she halted on the journey at 'Stow' and sheltered under a miraculously growing ash tree which came from her staff planted in the ground. Stow came to be known as 'St Etheldred's Stow', when a church was built to commemorate this event. It is more likely that this 'Stow' actually refers to another fair, near Threekingham. Ecgfrith later married Eormenburg and expelled Wilfrid from his kingdom in 678. According to the Anglo-Saxon Chronicle, Æthelthryth founded a double monastery at Ely in 673, which was later destroyed in the Danish invasion of 870.
Bede told how after her death, Æthelthryth's bones were disinterred by her sister and successor, Seaxburh and that her uncorrupted body was later buried in a white, marble coffin. In 695, Seaxburh translated the remains of her sister Æthelthryth, who had been dead for sixteen years, from a common grave to the new church at Ely. The Liber Eliensis describes these events in detail. When her grave was opened, Æthelthryth's body was discovered to be uncorrupted and her coffin and clothes proved to possess miraculous powers. A sarcophagus made of white marble was taken from the Roman ruins at Grantchester, which was found to be the right fit for Æthelthryth. Seaxburh supervised the preparation of her sister's body, which was washed and wrapped in new robes before being reburied. She apparently oversaw the translation of her sister's remains without the supervision of her bishop, using her knowledge of procedures gained from her family's links with the Faremoutiers Abbey as a basis for the ceremony.
After Seaxburh, Æthelthryth's niece and her great-niece, both of whom were royal princesses, succeeded her as abbess of Ely.