Lagarde was born in Paris, France, into a family of academics. Her Father, Robert Lallouette, was a Professor of English; her mother, Nicole (Carré), was a Latin, Greek and French literature Teacher. Lagarde and her three brothers, all younger, spent their childhood in Le Havre where she attended the Lycée François 1er and Lycée Claude Monet. As a teenager, Lagarde was a member of the French national synchronised swimming team. After her baccalauréat in 1973, she went on an American Field Service scholarship to the Holton-Arms School for girls in Bethesda, Maryland. During her year in America, Lagarde worked as an intern at the United States Capitol, as Representative william Cohen's congressional assistant, helping him correspond with his French-speaking constituents during the Watergate hearings. She graduated from Paris West University Nanterre La Défense, where she obtained Master's degrees in English, labor law, and social law. She also holds a master's degree from the Institut d'études politiques d'Aix-en-Provence. Since 2010, she has presided over Sciences Po Aix's board of Directors. She also prepared for École nationale d'administration's entrance exam but ultimately failed to gain admission to the elite public administration school.

Lagarde joined Baker & McKenzie, a large Chicago-based international law firm, in 1981. She handled major antitrust and labour cases, was made partner after six years and was named head of the firm in Western Europe. She joined the executive committee in 1995 and was elected the company's first female Chairman in October 1999.

Lagarde is divorced and has two sons, Pierre-Henri Lagarde (born 1986) and Thomas Lagarde (born 1988). Since 2006, her partner has been the Entrepreneur Xavier Giocanti from Marseille.

A noted anti-trust and labour Lawyer, Lagarde was the first female chair of the international law firm Baker & McKenzie between 1999 and 2004.

In 2004, Lagarde became President of the global strategic committee.

As France's Trade Minister between 2005 and May 2007, Lagarde prioritized opening new markets for the country's products, focusing on the Technology sector. On 18 May 2007, she was moved to the Ministry of Agriculture as part of the government of François Fillon. The following month she joined François Fillon's cabinet in the Ministry of Economic Affairs, Finance and Employment to become the first woman in charge of economic policy in France. She was the only member of the French political class to condemn Jean-Paul Guerlain's racist remarks of 2010.

On 16 November 2009, the Financial Times ranked her the best Minister of Finance in the Eurozone.

Lagarde was interviewed in the documentary film Inside Job (2010), which later won an Academy Award for Best Documentary Feature.

Lagarde was portrayed by Actress Laila Robins in the 2011 HBO television drama Too Big to Fail, which was based on the popular book of the same name by New York Times Journalist Andrew Ross Sorkin.

On 28 October 2012, Greek reporter and Editor Kostas Vaxevanis claimed to be in possession of the list and published a document with more than 2,000 names in his magazine Hot Doc. He was immediately arrested on charges of breaching privacy laws with a possible sentence of up to two years in prison. After a public outcry, Vaxevanis was found not guilty three days later. Vaxevanis then faced a retrial (the Greek authorities were yet to charge anyone on the list), but was acquitted again. A few days before the Greek general elections of January 2015, when it was clear that left-wing Syriza would come to power, the financial crimes police of the conservative government of Antonis Samaras shredded reams of documents pertaining to corruption cases.

In 2014, Lagarde was named the fifth most powerful woman in the world by Forbes magazine.

In January 2015, on the death of King Abdullah of Saudi Arabia, Lagarde said "he was a strong believer in pushing forward women's rights", prompting a number of observers to comment on the life of women generally in Saudi Arabia. The week before Abdullah's death, a Burmese woman had been publicly beheaded.

In 2017, Lagarde was listed by UK-based company Richtopia at number 1 in the list of 100 Most Influential People in Multinational Organisations.