Johnston was born Annie Julia Fellows Johnston, daughter of Albion Johnston, a minister, and Mary Erskine Fellows. She had a brother, Erwin, and two sisters, Lura and Albion. She married a cousin, William L.
He was a widower with three children, Rena, John, and Mary. Rena died in 1899 and John in 1910 or 1911. Johnston moved to Pewee Valley in 1898, the move becoming permanent in 1911.
There, she lived until her death at "The Beeches" with her stepdaughter, artist Mary Gardener Johnston. The Beeches was built in 1901 by "Mamie" Craig Lawton, widow of Gen. Henry Ware Lawton, who was the only general killed during the Spanish-American War. Members of the Craig family inspired 12 characters in the "Little Colonel" stories. The Little Colonel series was her 13-book collection beginning with The Little Colonel.
An assessment of her achievements in connection with her induction into the Kentucky Writers Hall of Fame says, Her work is now considered anachronistic, depicting Reconstruction Era South still transitioning from the Civil War, and must be taken in the context of the times.