Born in Henrico County, Holladay moved with her family to Pennsylvania as a child. She received an AB degree from the College of William and Mary in Williamsburg in 1980, and an MA from the Pennsylvania State University in University Park, Pennsylvania, in 1982. In her novel Mercury—set in imaginary Hawk Lake, Arkansas—and in other stories set primarily in the South, Holladay has developed her interest in exploring connections between past and present, specifically, the resonance of history in the lives of present-day characters who are attuned to the lives of people from the past. She is connected to the literary tradition of such writers as Eudora Welty and Katherine Anne Porter, who looked to history and legend as sources of material. Holladay cites Thomas Wolfe's Look Homeward, Angel (1929) as a major influence for its powerful evocation of time and place.

At times, central Virginia is specifically a source of inspiration for her; for instance, The Quick-Change Artist (2006) is a collection of short stories centered around Forest Lodge, a Glen Allen resort hotel that flourished during the 1880s, became a rural tenement by the 1960s, and was demolished in 1989. Those stories, along with others such as "The Bridge," set in Orange County during the American Civil War (1861–1865), allow Holladay to mine Virginia history as source for contemporary southern fiction.

"Everything about Virginia inspires me," she has said. "The past is right there. You dig the soil and find Indian arrowheads and prehistoric shells." Drawn to characters with quirky kinds of knowledge, Holladay researches occupations of earlier times, such as stagecoach driver, blacksmith, and tobacco farmer. Local history, she adds, is a key inspiration—both in the facts and the myths that it spawns.

According to The Southeast Review, her characters include "some of the most unique and surprising in contemporary American short fiction." As Holladay has explained, "I like to write about people caught up in forces larger than themselves, such as war, cultural change, and the changes wrought by time itself."

She is married to the poet and fiction writer John Bensko; they teach in the creative writing department at the University of Memphis, where Holladay leads fiction workshops and teaches literary form.

Major Works

• The People Down South (1989)
• The Palace of Wasted Footsteps (1998)
• Mercury (2002)
• The Quick-Change Artist (2006)
• A Fight in the Doctor's Office (2008)