Grace Thurston Arnold was born on July 28, 1890, in North Scituate, Rhode Island.

She studied painting and drawing at the Rhode Island School of Design between 1910 and 1912. It was there that Grace met her future husband, the painter Percy Albee. The Albee family, which included five sons, moved to France in 1928. They settled in Paris where Grace studied wood engraving with Paul Bournet at the Institut d'Esthétique. She had a solo exhibition of her work in Paris in 1932, and the following year the family returned to the United States. They moved around the county living in Doylestown, Pennsylvania and New York City but eventually returned to Rhode Island in 1974.

Grace Albee was elected an associate member of the National Academy of Design in 1941 and appointed a full Academician in 1946.

A major retrospective of eighty of Albee's works was held at the Brooklyn Art Museum in 1976, and the National Museum of Women in the Arts mounted a show of her work in 1999. Her works are held in the Library of Congress, the Metropolitan Museum of Art, the National Gallery of Art, the Cleveland Museum of Art, the Boston Public Library, the National Museum of Women in the Arts, the Rhode Island School of Design, the Newport Art Museum, and the Brooklyn Museum.

Grace Thurston Arnold Albee died on July 26, 1985, in Barrington, Rhode Island.