Akhundzade was born in 1812 in Nukha (present-day Shaki, Azerbaijan) to a wealthy landowning family from Iranian Azerbaijan. He was ethnically an Azerbaijani. His parents, and especially his uncle Haji Alaskar, who was Fatali’s first teacher, prepared young Fatali for a career in Shi’a clergy, but the young man was attracted to the literature. In 1832, while in Ganja, Akhundzade came into contact with the poet Mirza Shafi Vazeh, who introduced him to Western secular thought and discouraged him from pursuing a religious career. Later in 1834 Akhundzade moved to Tiflis (present-day Tbilisi, Georgia), and spent the rest of his life working as a translator of Oriental languages in the service of the Russian Empire’s Viceroyalty. Concurrently, from 1837 onwards he worked as a teacher in Tbilisi uezd Armenian school, then in Nersisyan school. In Tiflis his acquaintance and friendship with the exiled Russian Decembrists Alexander Bestuzhev-Marlinsky, Vladimir Odoyevsky, poet Yakov Polonsky, Armenian writers Khachatur Abovian, Gabriel Sundukyan and others played some part in the formation of Akhundzade’s Europeanized outlook.

His parents’ was Mirza Mahammad Taghi (born in Khamaneh) and Nane khanum. He married to Tubu Khanum, his mother’s cousin in 1842. He had 13 children of whom only 2 (Nisa and Rashid) reached maturity. His second marriage was to Nazli Beyim, a descendant of Javad Khan, with whom he fathered Sayrabayim. He married off both Nisa and Sayrabayim to Khan Baba Mirza from Bahmani family. His grandson Fatali was purged in 1938.

Well ahead of his time, Akhundzade was a keen advocate for alphabet reform, recognizing deficiencies of Perso-Arabic script with regards to Turkic sounds. He began his work regarding alphabet reform in 1850. His first efforts focused on modifying the Perso-Arabic script so that it would more adequately satisfy the phonetic requirements of the Azerbaijani language. First, he insisted that each sound be represented by a separate symbol – no duplications or omissions. The Perso-Arabic script expresses only three vowel sounds, whereas Azeri needs to identify nine vowels. Later, he openly advocated the change from Perso-Arabic to a modified Latin alphabet. The Latin script which was used in Azerbaijan between 1922 and 1939, and the Latin script which is used now, were based on Akhundzade’s third version.

In 1859 Akhundzade published his short but famous novel The Deceived Stars. In this novel he laid the foundation of Azerbaijani realistic historical prose, giving the models of a new genre in Azerbaijani literature. By his comedies and dramas, Akhundzade established realism as the leading trend in Azerbaijani literature.