Tahari was born in 1952 in Jerusalem, the middle son of a Persian Jewish couple. He has four sisters, Aliza, Diana, Shulie and Illana. He has two brothers Avraham and Yosi. The family immigrated to Israel from Iran and lived in a ma'abara transit camp in what is now Mevasseret Zion. In 1953–1957 the family went back to Iran, returning later to Israel. When his parents divorced and his father remarried, Tahari was sent to an orphanage ("Sde Hemed") in Rishon Lezion, later moving to Tel Aviv ("Maon Hayeled"). The following years were spent in Kvutzat Schiller and an Israeli Air Force boarding school in Haifa.
Tahari moved to New York in 1971, working his way up from electrician in the Garment District to the head of his own womenswear line.
In 1974, Tahari opened a boutique on Madison Avenue. His New York flagship is located in Soho. His designs are described as "tailored, modern, and upscale office-friendly." The line has expanded into menswear and accessories.
He and his former business partner Andrew Rosen co-founded the Theory fashion brand in 1997. Tahari designed the clothes and Rosen was in charge of marketing and sales. Tahari sold his share of the business in 2003.