Anna Isabella Gonzaga was the daughter of Ferrante III Gonzaga, Duke of Guastalla, and Margherita d'Este (1619–1692), daughter of Duke Alfonso III d'Este. As the eldest of two daughters, she was the heir of the Duchy of Guastalla and Luzzara Reggiolo, areas which had long been a source of conflict between the two Gonzaga lines: the Gonzagas of Gustalla and the Gonzagas of Mantua. In 1671, she was married to Ferdinando Carlo Gonzaga. The marriage was arranged by her aunt, the empress dowager Eleanor Gonzaga, and the purpose was to unite the two Gonzaga lines. The marriage was childless.
In 1678, her father died, and her rights to Guastalla was challenged by Don Vincenzo Gonzaga, who married her sister Anna Maria Vittoria and proclaimed himself Duke of Guastalla. Mantua protested, after which Spain intervened and threatened Mantua. In 1691, Spain attacked Mantua itself, and Ferdinando fled to Venice with his ministers. Anna Isabella served as regent in his absence, assisted by her mother-in-law, the Imperial representative Marquis Obizzi and some advisers. She managed to calm the frightened public and successfully arranged for the defense of Mantua against Spain. She also successfully handled the following peace negotiations with Spain with the Spanish governor i Milan and the viceroy of Naples.
In 1702, during the War of the Spanish Succession, the Duchy of Mantua was attacked by Spain who wished to conquer the areas of Luzzara and Cocoon. Ferdinando fled and left Anna Isabella to handled the situation as regent. During her second regency, she was assisted by Mr de Liesse. She appointed the commanders to handled to defense of Luzzara and Cocoon and issued negotiations for foreign protection of Sababionetta.