Shunji Iwai was born on January 24, 1963, in Sendai, Miyagi Prefecture, Japan. After graduating from Yokohama National University in 1987, he began his career in the entertainment industry directing television dramas and music videos. His 1993 television drama Fireworks, Should We See It from the Side or the Bottom? brought him critical praise and won the Directors Guild of Japan New Directors Award, an honor rarely given to a non-feature film director.

While Iwai is internationally renowned as a filmmaker for works such as Love Letter, Swallowtail Butterfly, and All About Lily Chou-Chou, he is also an original creator whose work spans anime and manga. He is the original creator behind the anime film Fireworks, Should We See It from the Side or the Bottom?, which was adapted from his 1993 television play. He also wrote the script for a manga adaptation of Fireworks. In 2015, he wrote, directed, composed the music for, and edited his first animated feature film, The Case of Hana & Alice, which serves as a prequel to his 2004 live-action comedy Hana & Alice. The film received a nomination for Best Animation at the 18th Shanghai International Film Festival. A manga adaptation of The Case of Hana & Alice, with art by Sayman Dowman based on Iwai's original story, was serialized in Shogakukan's Yawaraka Spirits magazine from February to July 2015. He is also credited as the original creator for the manga Town Workers.

Iwai has described himself as an eizo sakka, or visual artist, a title that reflects his hands-on, multi-disciplinary approach to creation. He frequently writes his own screenplays, edits his films, and has composed the scores for many of his later works, including the anime The Case of Hana & Alice. His stories often focus on the interior lives of young protagonists, particularly adolescent girls, and explore themes of memory, first love, friendship, and the subtle complexities of human relationships. Visually, he is known for an evocative and lyrical style, often using natural elements like snow, cherry blossoms, and rain to underscore the emotional tone of a scene.

In the anime and manga industry, Iwai holds a significant position as a crossover creator whose primary identity is rooted in independent live-action cinema. His influence is particularly strong across East Asia, including China, Hong Kong, Taiwan, and South Korea, where his films have cultivated a dedicated following and helped pave the way for Japanese cultural exports. His work on The Case of Hana & Alice marks a successful expansion of his original story universe into a different medium, demonstrating the adaptability of his authorial voice beyond live-action filmmaking.