Garai was born in Hong Kong, the daughter of Janet, a journalist, and Adrian Garai, a high-ranked bank manager. She relocated to Singapore at five before her family returned to Wiltshire in the United Kingdom when she was eight.

She attended an independent boarding school, at Stonar and later moved at sixteen to London to attend the City of London School for Girls where she ended up finishing off her A-levels. She was fond of drama and appeared in school plays, and also with the National Youth Theatre up until the age of 18, where she was spotted by an agent who whisked her away to play the younger version of Judi Dench's character in a television production called The Last of the Blonde Bombshells.

It was during her first break from University that Garai landed a part in a BBC-produced television series called Attachments. It was this production that prompted her to make the decision to stop her education and concentrate solely on her acting career.

Garai's first major film role was in 2002's Nicholas Nickleby. She played Kate Nickleby, a supporting role, in the well-reviewed film. The entire cast was widely recognised for their work and were awarded Best Ensemble by the National Board of Review. In 2003's I Capture the Castle, she played 17-year-old Cassandra Mortmain. Her performance earned her a nomination for a Most Promising Newcomer award from the British Independent Film Awards. Dirty Dancing: Havana Nights (2004) was Garai's biggest critical flop to date. Her performance received mixed reviews as many critics felt let down after her previous impressive turns. Later that same year Vanity Fair was released.

In 2005, Garai received another BIFA nomination, this time for their Best Supporting Actress award, for her performance as Siobhan in the independent film Inside I'm Dancing. Her portrayal earned her the British Supporting Actress of the Year award from the London Film Critics Circle.

Also in 2005 Garai starred in a lavish Australian miniseries called The Incredible Journey of Mary Bryant. At $15 million it was the most expensive miniseries ever shot in Australia. While critics hailed it as "pleasingly old-fashioned adventure", it was her performance that won the most admiration and earn her two nominations: Best Lead Actress in Television from the Australian Film Institute and Most Outstanding Actress in a Drama Series from the Logie Awards. As The Observer noted: "As for the tireless Garai, she once again demonstrated an instinctive understanding of the vital difference between overperforming and overacting. Garai was last seen on television in the BBC's Andrew Davies adaptation of Daniel Deronda, which was screened simultaneously with Davies's ITV adaptation of Dr. Zhivago, featuring Keira Knightley. Garai's Gwendolen was so superior to Knightley's Lara that it may have been the first time an actor was blown off not just the screen but a whole different channel".[citation needed]

When casting for Dr. Zhivago, Davies originally had Garai in mind for the role of Lara, but when Knightley auditioned, he decided that she was the better actress for the role. A similar thing happened with Joe Wright's adaption of Pride & Prejudice. Wright had initially thought that Knightley was too beautiful for the role, but her tomboy nature eventually won him over. Conversely, when casting his latest film, Atonement, in which both actresses appear, Wright ended up casting Garai in a role he had originally imagined Knightley would take.