Her father was Richard Simon (co-founder of Simon & Schuster), an accomplished pianist who often played Chopin and Beethoven at home. She was raised in the Riverdale neighborhood of New York City and has two sisters and a brother.

After a short-lived attempt at launching a career with her sister Lucy Simon (they had a minor hit in the mid-1960s with a version of the children's song "Winken, Blinken, and Nod" as "The Simon Sisters"), Simon launched her solo career in 1971 with the eponymously-titled album Carly Simon. The album contained a top-ten hit, "That's the Way I've Always Heard It Should Be", and was followed quickly by a second album, Anticipation, the title cut from which also scored airplay. Simon's major breakthrough, though, was 1972's No Secrets. The album spawned several successful singles, including Simon's biggest record, "You're So Vain", a sarcastic profile of a self-absorbed lover. The song was a number one hit, and aroused much speculation regarding its subject, with many rumors pointing to Mick Jagger of the Rolling Stones, who sang back up on the recording; other nominees included Warren Beatty, Cat Stevens, and Kris Kristofferson.

Simon married Taylor in 1972 (see 1972 in music) and released well-received albums Hotcakes (1974) and Playing Possum (1975). Her sales quickly began sinking, though, in the later 1970s, with only a few Top Ten hits, including "Nobody Does It Better" (from the soundtrack to The Spy Who Loved Me, a James Bond film) and "You Belong to Me" (from Boys in the Trees, 1978).

Simon and Taylor had two children, Sarah Maria (b. January 7, 1974) and Benjamin Simon Taylor (b. January 22, 1977), prior to their 1983 divorce.

In 1980, Simon collapsed onstage of exhaustion, and largely retired from performing in the 1980s. "Why" (1982) was a hit in the UK, but she continued to scrape only the bottom of the charts with most of her singles in the 80s; during this time Simon also contriguted to several film scores, including the song "Let the River Run" for Working Girl (for which she won the Academy Award for Best Song in 1988).

Simon's most recent album release was The Bedroom Tapes (2000; see 2000 in music).

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