Icahn was raised in a Jewish family in the Far Rockaway, Queens section of New York City, where he attended Far Rockaway High School. His Father, an atheist, was a cantor, and later a substitute Teacher. His mother also worked as a schoolteacher. Icahn graduated from Princeton University with a Bachelor of Arts degree in philosophy in 1957 and then entered New York University School of Medicine, but he dropped out after two years to join the army reserves.

Icahn began his career on Wall Street as a stockbroker in 1961; in 1968, he formed Icahn & Co., a securities firm that focused on risk arbitrage and options trading. In 1978, he began taking controlling positions in individual companies. Icahn developed a reputation as a "corporate raider" after his hostile takeover of Trans World Airlines in 1985. Icahn systematically sold TWA's assets to repay the money he borrowed to purchase the company, which was described as "asset stripping." In 1988, Icahn took TWA private, gaining a personal profit of $469 million, and leaving TWA with a debt of $540 million. In 1991, he sold TWA's London routes to American Airlines for $445 million. He formed lowestfares.com to sell TWA tickets and acquired portions of Global Leisure Travel from Ramy El-Batrawi to merge into it.

In 1979, Icahn married Liba Trejbal, a ballerina from the former Czechoslovakia. They separated in 1993 and divorced in 1999 after years of litigation during which Liba sought to invalidate a prenuptial agreement she had signed prior to their marriage, claiming duress as she was pregnant at the time. Liba originally fought Icahn's offer of roughly $1.5 million a year because he was worth billions at the time and eventually settled for an undisclosed amount. They have two children, one of whom is Brett Icahn. His nephew is Rick Schnall.

In the 1980s Icahn developed a reputation as a "corporate raider" after profiting from the hostile takeover and asset stripping of the American airline TWA. According to Forbes magazine, Icahn had a net worth of $16.6 billion in 2017, making him the 26th-wealthiest person on the Forbes 400, and the 5th-wealthiest hedge fund manager.

In 1985 Icahn established Foxfield Thoroughbreds, a horse breeding operation. At that year's Newstead Farm Trust sale run by Fasig-Tipton, he paid $4 million for Larida, a 6-year-old mare and a record $7 million for the 4-year-old bay mare Miss Oceana who was in foal to champion sire, Northern Dancer.

Icahn launched an unsuccessful $7 billion hostile takeover for 89% of U.S. Steel in late 1986.

Icahn's Meadow Star won the 1990 Breeders' Cup Juvenile Fillies and was voted the Eclipse Award for Outstanding Two-Year-Old Filly. In 1992, Foxfield ended its racing operation and became a commercial breeder. Having bred more than 140 stakes horses, in 2004 Icahn shut down Foxfield, selling all his mares and weanlings without reserve at the Keeneland Sales November breeding stock auction.

In 1999, Icahn married his longtime assistant and former broker, Gail Golden. She has two children from a prior marriage.

In July 2001 Icahn's Riverdale, LLC lent Genesisintermedia $100 million in exchange for an option to purchase 2 million shares of the company.

In 2004, after Mylan Laboratories had announced a deal to acquire King Pharmaceuticals, Icahn purchased a large block of stock and threatened a proxy fight over the acquisition. Mylan later gave up its efforts to acquire King.

In 2005, XO Holding announced its intention to sell the wired part of its Business for $700 million to its majority shareholder and chairman Icahn; the money would be used to pay back its debts and to buy back its preferred stock for about $600 million from Icahn. Icahn would have then owned the wired Business outright, and still own his 60% stake in XO. In spite of Icahn's majority ownership and the board of Directors declaring the deal to be in the best interest of shareholders, R2 and other minority shareholders defeated the attempt through the Delaware Court in 2008, which awarded penalties for damages to the Business caused by Icahn's self-dealing and/or conflict of interest.

In August 2006, he bought stock in the video game publisher Take-Two Interactive, and later increased his holdings to 11.3% in 2009, becoming the company's second-largest shareholder.

In January 2007, he purchased a 9.2% stake in Telik, a biotech company engaged in cancer research. He also made an investment of 6.1 million shares of WCI Communities (acquired by Lennar Corporation). He also owned about 33.5 million shares of Motorola, but in May was refused a seat on its board of Directors. On February 9, 2007, Lear Corporation's board of Directors accepted a $2.3 billion takeover offer from Icahn. That month he also invested $50 million in Motricity, a North Carolina-based provider of mobile content delivery Technology. In 2007, Icahn and his affiliates also owned majority positions in ACF Industries, American Railcar Industries, Philip Services, and NYSE-listed Icahn Enterprises. By September he also owned 8.5% of the Business software company BEA Systems. He increased his holdings to 13% in October, two months before Oracle Corporation announced it was purchasing BEA Systems. Beginning in 2007, Icahn gradually increased his stake in biotechnology company Biogen.

Icahn sold his casino interests in Nevada in February 2008, including the Stratosphere, Arizona Charlie's Boulder, Arizona Charlie's Decatur, and Aquarius Casino Resort which were operated through American Entertainment Properties, a subsidiary of Icahn Enterprises. The sale price of $1.3 billion was roughly $1 billion more than he paid for the properties. In March 2008, Icahn sued Motorola as part of his effort to gain four seats on Motorola's board and force a sale of its mobile Business. That month, a story about Icahn aired on American news program, 60 Minutes, with reporter Lesley Stahl and he also appeared on Nightly Business Report and discussed his views on proxy fights. In May 2008, Icahn purchased a large block of shares in Yahoo, and shortly thereafter threatened to start a proxy fight to remove Yahoo's board of Directors in response to their rejection of Microsoft's takeover bid. Instead, he forced an agreement to expand Yahoo's board to eleven members, including Icahn and two others of his choice. In June 2008, Icahn launched The Icahn Report, which hosts United Shareholders of America where individual Investors can sign up and campaign for shareholder rights. In September/October 2008 Icahn was involved in the rejected attempted purchase of Imclone by Bristol-Myers Squibb and in the eventual sale of Imclone to Eli Lilly and Company in an all-cash deal valued at $6.5 billion. In December that year he filed suit against Realogy over a proposed debt swap.

In April 2009, Icahn engaged in a proxy battle for Amylin. In September, he offered to buy the shares of XO he did not already own for 55 cents each. He later raised his offer to 80 cents, which ultimately expired. In October, he resigned from the board of Directors at Yahoo!, and by the following February had reduced his equity stake from a one-time high of 75 million shares to 12 million shares.

In 2010, Icahn joined the Giving Pledge list, pledging to give away more than half his fortune, yet has not decided on the specific beneficiaries.

In January 2011, Icahn once more made a bid to purchase the remaining shares of the XO Holder Common stock. By February he had accumulated a 9.08% stake in The Clorox Company (CLX). On March 15, 2011, Mentor's board issued a strong warning to its shareholders against a proxy action by Icahn.

In October 2012, Icahn purchased a 10% stake in Netflix. In November he was involved in a proxy battle over control of the Oshkosh Corp. board of Directors.

Icahn made a substantial contribution to his alma mater, Princeton University, to fund a genomics laboratory which bears his name, the Carl C. Icahn Laboratory at the University's Institute for Integrated Genomics. He also made large contributions to Mount Sinai Hospital, New York, of which he is a trustee, which in return not only named a building the Icahn Medical Institute designed by Davis Brody Bond, but also, in 2013, renamed the Mount Sinai School of Medicine as the Icahn School of Medicine at Mount Sinai. The genomics institute led by Eric Schadt was also renamed and is now the Icahn Institute for Genomics and Multiscale Biology.

In January, 2014, Icahn paid another half billion dollars for Apple Inc. shares he considered "very cheap." Also in January, Icahn proposed to eBay to spin off PayPal, an e-commerce Business. This started a proxy fight which was settled by April. By June 2014, Icahn had acquired a 9.4 percent stake in Family Dollar and, as its biggest shareholder, he became involved in a deal whereby Family Dollar was acquired by Dollar Tree for $8.5 billion. He then disposed of about a third of his stake. In October 2014, Icahn took a stake in Canadian Energy company Talisman Energy. The company's stock price went down by 71% and he sold his shares two months later.

On May 15, 2015, Icahn made a $100 million investment in the ride-sharing Service Lyft. In November 2015, Icahn hired CBRE Group Inc. to market the unfinished resort Fontainebleau Las Vegas to potential buyers. That month he swapped his stake in eBay for the same number of PayPal Holdings shares. At that time Icahn held a 7.13% stake in Xerox, making him the second-largest investor after The Vanguard Group. In December 2015 Icahn made a qualifying offer to purchase the auto-parts and maintenance chain Pep Boys for $15.50 a share. He also raised his stake in the Houston-based Energy company Cheniere Energy to 13.8, making him its largest shareholder. Icahn sold the unfinished Las Vegas casino, Fountainebleau, for $600 million in August 2017.

On January 30, 2016, Icahn donated $1 million for US veterans groups at a Des Moines, Iowa, fundraiser held by Donald Trump.

According to Forbes magazine, Icahn had a net worth of $16.6 billion in 2017, making him the 26th-wealthiest person on the Forbes 400, and the fifth-wealthiest hedge fund manager.