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We develop a model for carrier generation by impact ionization in graphene, which shows that this effect is non-negligible because of the vanishing energy gap, even for carrier transport in moderate electric fields. Our theory is applied to graphene field effect transistors for which we parameterize the carrier generation rate obtained previously with the Boltzmann formalism [A. Girdhar and J. Leburton, Appl. Phys. Lett. 99, 229903 (2011)] to include it in a self-consistent scheme and compute the transistor I-V characteristics. Our model shows that the drain current exhibits an “up-kick” at high drain biases, which is consistent with recent experimental data. We also show that carrier generation affects the electric field distribution along the transistor channel, which in turn reduces the carrier velocity.