Hammer was born in Hollywood. She did not formally study film; she was educated in psychology, art, and English literature at UCLA and San Francisco State University.
Hammer combined some of her early activist and aesthetic interests as a teacher at Marin County Juvenile Hall, but in 1967 - at the age of 28 - she shot her first film, Schizy, about her own coming-out process.
Hammer's radical separatist stance triggered a controversy early in her career. For the debut of her sexually explicit 1974 short Dyketactics, generally cited as the first film celebrating lesbian love to be made by a lesbian, she insisted that the film be seen only by female audiences.
Hammer's "goddess" films, such as Women's Rites (1974) and Sappho (1978), are typical of this stage of her work. These films intermingle erotic imagery with a sense of fantasy to create a lesbian cinema that avoids the objectifying male gaze. Also during the 1970s the director continued her explorations of female sexuality in works such as Multiple Orgasm (1977).
She is most often her own subject, from this early period with works like I Was/I Am (1973), where she appears in both motorcycle drag and a gown, to the later, more ambitious films such as Tender Fictions (1995), whose goal is to reassert the presence of the lesbian in cinema.
Hammer's most famous work is probably Nitrate Kisses (1992), a striking attempt to restore a lost queer history, by intermingling images of lesbian and gay male lovemaking with aural and visual collages of concentration camps.