Born on the planet of Concord Dawn, Arla spent her youth living on the Fett homestead with her parents and brother, Jango. In 58 BBY, when she was 14, the Mandalorian Civil War—fought between the True Mandalorians, under Jaster Mereel, and the splinter group known as the Death Watch, under Tor Vizsla—spread to Concord Dawn. When the Death Watch began hunting down members of the True Mandalorians that escaped from a lost battle, Arla's father offered Mereel and his men refuge on their farm. The Death Watch tracked them to the homestead and killed her father as her brother Jango was fleeing. When they turned their attention on Jango, Arla witnessed their mother shoot and kill one of the Death Watch members with a blaster rifle, only to be killed herself. While Jango fled and would be later be rescued by the Mandalorians, Vizsla ordered there be no witnesses and Arla was to be "taken care of".
Thus, Arla was believed to have been killed on Concord Dawn along with her parents. Seemingly unknown to anyone else, she was spared by the members of the Death Watch, and was held hostage by them. They viewed her as a prize, and branded their logo onto her back. After a while as their prisoner, Arla joined the Death Watch cause as an assassin, and only left them when she got arrested for a shooting 10 years before the end of the Clone Wars. While in custody, Arla was deemed mentally unstable and was ordered to be held in the Valorum Center—a mental institution on Coruscant—for many years.
In 19 BBY, three years after Jango's death on at the Battle of Geonosis, the former Jedi-turned-Mandalorian, Bardan Jusik, visited the center looking for Separatist scientist, Dr. Ovolot Qail Uthan. At the time of his first visit, Jusik had walked passed Arla's cell, hearing words that resembled the Mandalorian language. Later, during the Separatist invasion of Coruscant, Kal Skirata and Jusik returned to the center to free Uthan from her cell and upon doing so, Bardan again heard words that resembled Mando'a. The ex-Jedi acted on impulse and decided to free the prisoner, and when the group was picked up by Walon Vau afterward by a LAAT/i gunship, Jusik revealed her to be Arla Fett, Jango's lost and supposedly dead sister. Arla would go to Mandalore along with Jusik and the rest of the Skirata's rogue band when they fled Coruscant following the issue of Order 66, taking up residence in an old storage room at their bastion home of Kyrimorut.
At Kyrimorut, attempts were made to regulate Arla's medication from the regimen given at Valorum Center, but the dosages were insufficient and Arla attacked Jusik without any provocation. After hearing Arla's story and her insistence that she forgot everything, Jusik offered to use the Force to wipe her memory of the traumatic events in exchange for intel on the Death Watch.
Arla Fett, after her capture by the Death Watch, was resentful of her captors, but grew to care for them. Instead of attempting to escape them, she joined their cause as an assassin. Through Death Watch intel, she found out that her younger brother Jango had survived, but made no move to reunite with him. During her arrest and incarceration at the Valorum Center, she was heavily sedated in an effort to prevent her from killing herself over the guilt she felt in her willing participation in a group that killed her family. After she was rescued by Bardan Jusik and brought back to Mandalore, her medication was changed, and while she was more lucid, her memories and the guilt came flooding back, and she ended up launching an unprovoked attack at Jusik while wandering around the compound. Later on, in a moment of clarity, Arla begged Jusik to kill her in an attempt to put her out of her misery, but he refused. Instead, the pair agreed to a compromise that involved Jusik erasing her memories in exchange for intel on the Death Watch.
Arla spoke the language of Concord Dawn, Concordian, which has loan words from Mando'a. By her own admission, Arla was a "good shot" with a blaster, which helped her in her career as a Death Watch assassin.
In the unreleased Imperial Commando 2 Bardan Jusik would have rubbed Arla Fett's memory, enabling her to cope with her trauma. Afterwards, she would have forgotten being Arla Fett or what had happened to her family, but she didn't feel the pain of memory. Arla would later go on to marry a young man thirty years her junior, Bardan Jusik. In Legacy of the Force: Revelation, Jusik mentions his wife but it was not canonically confirmed if this wife was Arla.
Arla Fett first appeared in the comic Jango Fett: Open Seasons, but as an unnamed sister in a flashback. Most of her backstory, including her name, was fleshed out by Karen Traviss in the novels Order 66: A Republic Commando Novel and Imperial Commando: 501st.
The character of Arla Fett suffered from an in-universe version of Stockholm syndrome, a proposed condition where a captive comes to care for, and even love, her captors.