Arete is daughter of Rhexenor, son of Nausithous (himself son of Poseidon and Periboea). After Apollo strikes Rhexenor down as a bridegroom without a male heir, Alcinous — her uncle — takes her as wife and honours her above all women who keep households under their husbands. The people look on her as on a goddess and greet her as she goes through the city; she ends strife among women for those she favours, and is skilled in handiwork and good understanding.

Athena describes her to Odysseus in these terms and instructs him to make Arete, not Alcinous, the first object of his supplication — a rare Homeric emphasis on a queen's decisive goodwill.

When Odysseus enters the palace he clasps Arete's knees and begs for conveyance home. She questions him closely — noticing that the clothes he wears are ones her household washed for Nausicaa — before the king and court receive him as guest. Her favour, together with Alcinous's hospitality, secures the ship that finally bears Odysseus sleeping to Ithaca.

She appears throughout as noble superintendent of the household: present at the feasts, alert to the stranger's story, and central to the Phaeacian ethic of guest-friendship that closes the wanderings.

In Apollonius's Argonautica Book 4, Arete and Alcinous receive Jason and Medea on Drépané. When Colchians demand Medea's return for the death of Absyrtus, Medea appeals to Arete, who in turn presses Alcinous for mercy. He decrees that a virgin Medea must go back to her father, but a wedded wife will stay with her husband.

Arete goes by night to warn Jason and Medea; they consummate the marriage at once. The Colchians must depart without their princess. Apollodorus likewise records that Arete performed (or arranged) the marriage of Medea to Jason when the Argonauts reached Corcyra after Thrinacia.