Cody, who took the pen name Diablo Cody (diablo is Spanish for "devil") during a trip to Cody, Wyoming, attended Benet Academy, a Roman Catholic school in Lisle, Illinois. She grew up in Lemont, Illinois, a suburb of Chicago. She graduated from the University of Iowa with a media studies degree. While at the University of Iowa, Cody was a DJ at KRUI 89.7 FM. Her first jobs were doing secretarial work at a Chicago law firm and later proofreading copy for advertisements that played on Twin Cities radio stations.

Cody began a parody of a weblog called Red Secretary, detailing the (fictional) exploits of a secretary living in Belarus. The events were thinly-veiled allegories for events that happened in Cody's real life, but told from the perspective of a disgruntled, English-idiom-challenged Eastern Bloc girl.

Cody's first bona fide blog appeared under the nickname Darling Girl after Cody had moved from Chicago to Minneapolis, Minnesota to "live in sin" with Jon (Jonny) Hunt, a musician she had met over the Internet. They married in October 2004, but separated in late 2007. On December 5, 2007, Cody announced in her "Pussy Ranch" blog that they are now divorced; Hunt wrote that they nonetheless remain friends. Cody currently resides in Los Angeles.

At the age of 24, Cody wrote her memoir Candy Girl: A Year in the Life of an Unlikely Stripper. The memoir began after Mason Novick, who would soon become Cody's manager, showed interest in Cody's acerbic wit. Based on the popularity Pussy Ranch had received, he was able to secure her a publishing contract with Gotham Books.