“I can't pretend that much has happened. I could not face going to Mrs Bell's choral reading of The Waste Land this evening and fighting my way back in the underground - but she was very hurt and said she had made the exact number of sausage-rolls. I feel terrible.” Thus Penelope Fitzgerald, writing in her mid-fifties, in 1972, to her younger daughter, Maria. It's the tone she often uses in her letters, whether to daughters, friends or publishers. Self-deprecating, wry, scatty, very English, it's something of a cross between Barbara Pym and Stevie Smith. When, in 1979, Offshore won the Booker prize (to general incredulity) and she became, in her sixties, a well-known novelist, this was the tone she would take with interviewers: charmingly absent-minded, not giving much away. Of one such encounter: “He told me he found me a rather difficult job but the truth was I couldn't think of very much to say.”

Certainly Fitzgerald, as these letters show, was a modest, reserved person. She often describes herself as unable to speak out emotionally: “I am very nervous of saying anything where people's feelings and sensibilities are concerned.” She sometimes accuses herself of not being fully grown-up: “I'm always giving myself little rewards and prohibitions, as if I were three years old, and I suppose, in fact, it's a sign of second childhood.” But her daffy manner was also a useful camouflage, like a cover of leaves over the mouth of a secretive animal's lair. It coexisted with the steely principle, luminous intelligence, professional energy, sharp judgments and stoic rigour that went into the books.

Like some other fine women writers, Fitzgerald had a late start as a published novelist (though a recent essay in the Hudson Review for spring 2008, drawing on her papers at the University of Texas, shows that her writing began much earlier). Born in 1917, the grand-daughter of a bishop, and the daughter of Evoe Knox, Punch writer and editor, she grew up in 1920s rural, artistic Hampstead. Her childhood gave her her work ethic: “Laziness makes me feel guilty for that is how I was brought up.” Her youthful memories were of seeing Stanley Spencer on the heath “with his pram full of canvasses”, or of going to sleep with a coal fire and the Poetry Bookshop rhymesheets on the walls. She often describes herself as a Georgian, in contrast to Bloomsbury, whose atmosphere and “personnel” she found “intensely unpleasant”. Her mother - rarely mentioned - died when she was young; her stepmother, Ernest Shepard's daughter, was only a few years older than her. They shared a lifelong interest in graphic art, crafts, stained glass and book design. Fitzgerald's heroes included William Morris, Ruskin, Spencer and Patrick Caulfield, and her letters show a keen interest in the look of her books.

She went to Oxford, worked in the Ministry of Food and the BBC during the war, and married, in her twenties, Desmond Fitzgerald, an Irishman who'd had a heroic and traumatic war. They had three children, and what seems to have been a ramshackle marriage shadowed by financial troubles and his heavy drinking. Desmond figures in the letters to her daughters as a comically inept, hopeless case: “Alas, poor Daddy couldn't manage the paint-spray...So the bath is not a great success.” “Daddy's dirtied up his new room already.” Letters to the daughters (there are none to her son), as they grow up, go to university, get jobs and start families, are often wistfully lonely: “The place certainly seems empty without you...It is best not to care too much.”

In the 1950s and 1960s, she went from an ill-fated bookshop in Southwold, to a barge on the Thames that sank (twice), taking with it all her photographs and papers, to a flat in Clapham, described here as “Squalid Council Estate”, and years of teaching. All this became material for her first four novels, written in the 1970s and 1980s after Desmond's death. They overlapped with three fine biographies, on Burne-Jones, the Knox brothers (her father and uncles), and the poet Charlotte Mew, whose dark, idiosyncratic work was one of Fitzgerald's passions. She tried, too, to write a life of LPHartley, but was beaten back by prohibitions - comically described here, especially the snooty obstructiveness of Hartley's friend Lord David Cecil. The letters often compare fiction and biography: she wants to write “biographies of people I loved, and novels about people I didn't like”.

But although fiction gives her an “intoxicating free feeling” and biography requires too much “energy and perseverance”, there is an overlap between them. Her late novels of the 1980s and 1990s, historically set in Italy, Russia, Cambridge and Germany, all have biographical seeds and come out of much research, buried deep below their pared-down surface. Her greatest novel, The Blue Flower, she calls “not really fiction”. That burying process is crucial to her art; she “deeply believes” that “less is more”. The shape of the life is hard to track here. There are huge gaps in the record, and many undated letters. Also, letters are grouped under recipients' names and divided into personal and professional, so that we have to jump around in time. Annotation is tantalisingly light and there is no chronology or bibliography. Still, we should be grateful for the riches that are here. The novelist's comic brio is wonderfully on show, especially with small English institutions such as the William Morris Society, a Chester theological college, or the Clapham Antiquarians, where a celebratory cake-cutting is held up by the lady “who felt it necessary to demonstrate how she had made a cake the year before exactly like the Tower of London, with a bridge that went down and up”.

Her professional life is fascinatingly, often distressingly, displayed, agent-less, knocked back by scornful reviews, moving from one publisher to another (did she ever get paid what she was worth?), only gradually coming to think of herself as a professional to be respected. She plays down her own successes, and is enjoyably caustic about big literary egos (Salman Rushdie, Malcolm Bradbury). She is an indefatigable worker - for PEN, the Arts Council, the Royal Society of Literature, literary prize-judging. Her politics are Liberal, she hates being bullied, supports underdogs and the forgotten, and is rueful about her own nostalgia for things such as Lyons teashops, telegrams, the Church of England, and “those little packets of salt in crisps”. Her view of life was generally dark: “No one who is brought up an evangelical can quite learn to trust earthly happiness, it must destroy you somehow.” But she was stoical. As she said in her eighties to another old lady friend, “We're survivors, so we might as well revel in it.”

So I Have Thought of You edited by Terence Dooley

Fourth Estate £25 pp532

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