The woman, who has not been identified, was working in the city with a non-governmental organisation.
Police said she was asleep when a security guard at the hotel where she was staying entered her room and attacked her.
The woman is receiving treatment for cuts and bruises, and legal assistance.
India court frees four accused of US woman's gang-rape
Doctors told reporters that the woman was in stable condition and had been visited in hospital by the district magistrate.
According to police, she had been visiting Varanasi for more than 40 years and would stay there for long periods of time.
Scrutiny of sexual violence in India has grown since the 2012 gang rape and murder of a student on a Delhi bus.
However, brutal sexual attacks against women and children continue to be reported across the country.
COMMENTS (6)
Comments are moderated and generally will be posted if they are on-topic and not abusive.
For more information, please see our Comments FAQ