Gillian was born in New York City in 1967, and was adopted the same day. When she was four years old, her family moved to Los Angeles, where she would grow up. By the time she was seven years old, Gillian had developed an affinity for playing the guitar.

She attended the University of California at Santa Cruz, where she discovered bluegrass music. Later, she moved to Boston and enrolled at the Berklee College of Music. There she met David Rawlings, who she soon began dating. Rawlings later became her musical partner.

The duo moved to Nashville in 1992, where they decided to try to build a musical career. Four years later, Welch released her first recording, Revival, which won a Grammy nomination for Best Contemporary Folk Album. Since then, she has received several other Grammy nominations, as well as IBMA awards.

She has released three other records since Revival, and has contributed work to several compilations and soundtracks, including the soundtrack for the Coen Brothers Movie Oh Brother, Where Art Thou?