Laxalt was born on August 2, 1922, in Reno, Nevada, the son of Basque parents, Therese (Alpetche) and Dominique Laxalt, a shepherd, both of whom had emigrated in the early 1900s from their homeland in the Pyrenees, which straddle France and Spain. Dominique became wealthy in the sheep industry, but he lost everything in the early 1920s. Thereafter, he went back to shepherding for the rest of his career. Therese, who had been trained at Paris's Cordon Bleu cooking school, eventually opened a restaurant called The French Hotel in the Carson City, Nev.

Therese and Dominique had six children: Paul, Robert (born in 1923), Suzanne (1925), John (1926), Marie (1928) and Peter (1931). The Laxalt children were raised largely by their mother as Dominique spent long periods of time away from the household as he tended to his sheep in the deserts and mountains of Nevada. The children all helped Therese at The French Hotel. It was there that Paul first acquired an interest in politics as he listened in on the conversations of the politicians who patronized the restaurant (including the legendary Sen. Pat McCarran). Paul played on the 1938 state basketball champion team at Carson High School before graduating and attending Santa Clara University. When World War II broke out, Paul joined the U.S. Army and served as a medic, seeing action in the Battle of Leyte in the Philippines. After the war, he graduated from the University of Denver (1949) law school.

Laxalt was married in 1946 to Jackalyn Ross (1927–2004), the daughter of John Rolly Ross, who was a federal judge in Nevada. The couple had five daughters (Gail, Sheila, Michelle, Kevin, and Kathleen) and one son (John Paul). They divorced in 1972. During the 1970s, Laxalt's daughter Michelle had a son, Adam Laxalt, with Laxalt's then-Senate colleague, Sen. Pete Domenici from New Mexico. Adam is currently the Attorney General of Nevada. The affair was not brought to light until 2013. He has twelve grandchildren and four great-grandchildren. Laxalt is currently married to his second wife, Carol, who had one daughter (Denise) from a previous marriage. After he retired from the Senate, Paul and Carol Laxalt continued to reside in northern Virginia.

Paul Laxalt's first attempt for public office was in 1950 when he ran for District Attorney of Ormsby County, Nevada, turning out the incumbent D.A. He served from 1950 to 1954. Laxalt's first run for statewide office came in 1962 when he ran for Lieutenant Governor against former Rep. Berkeley L. Bunker. Using innovative television ads and personal television appearances, Laxalt was able to introduce himself to the electorate, particularly in Southern Nevada where he was virtually unknown. In the middle of the campaign, at a Fourth of July rally in Las Vegas, Republican gubernatorial candidate and then-Lt. Gov. Rex Bell, a former Hollywood actor who had persuaded Laxalt to run with him on the GOP "ticket", dropped dead of a heart attack. A great amount of pressure was applied to Laxalt to run in Bell's place, but the young attorney demurred, and he remained in the lieutenant governor's race. He ended up defeating Bunker by a comfortable margin. Laxalt served one term as lieutenant governor from 1963 to 1967.

Republican candidates, running concurrently with the 1964 federal election, were undermined by the unpopularity of Sen. Barry Goldwater from Arizona, the Republican nominee for President against incumbent Lyndon B. Johnson, and the leader of their political ticket. Not long before election day, Goldwater scheduled a visit to Las Vegas. Laxalt's advisors told him he should "duck" Goldwater as they feared any association with the Goldwater would spell trouble. Laxalt, who often described Goldwater as his "political Godfather", reportedly told his aides, "Listen, Barry Goldwater is my friend. If I snubbed him now, I could never look him in the face again. I would rather lose." The Laxalt-Goldwater meeting on the tarmac was splashed on the front pages of local newspapers. (Goldwater lost Nevada by 28,000 votes.) Still, the Laxalt-Cannon race remained far closer than expected. As he watched the returns come in from his home in Carson City, Laxalt was stunned when one of the television networks actually declared him the winner. The next morning he flew to Las Vegas where he was told that certain precincts reported late and that Cannon had won by 48 votes, among the narrowest margins in a popular election for the U.S. Senate. The race was the subject of intense controversy for years.

Laxalt then decided to challenge two-term Gov. Grant Sawyer. Although the election would not take place until November of 1966, Laxalt launched his campaign in the middle of 1965. One of the most hotly debated issues during the campaign was the federal government's involvement in Nevada Gaming operations. The FBI and Justice Department had deep suspicions about organized crime's involvement in the gambling industry. Sawyer took the position that the federal government should stay out of Nevada's affairs. Laxalt took the position that Nevada had to cooperate with "the Feds" in order to be in a position to regulate gambling credibly. (In fact, one of Laxalt's first moves after his election was to meet with FBI Director J. Edgar Hoover to express Nevada's Desire to establish a cooperative relationship.) During the gubernatorial campaign, Laxalt also led a movement to purge members of the John Birch Society from the state Republican Party. Sawyer was defeated by an unexpectedly wide margin (nearly 6,000 votes). Laxalt served one term as governor, from January 1967 to January 1971.

In 1970, Laxalt lobbied President Richard Nixon to reduce the prison sentence of notorious Teamster leader Jimmy Hoffa after Hoffa was convicted of attempting to bribe Sen. Howard Cannon, whom Laxalt had unsuccessfully challenged in 1964. While governor, Laxalt worked with Teamster officials on gambling Investments in Nevada.

After leaving the governor's mansion, Laxalt and his family opened a hotel/casino in Carson City. In 1974, when twenty-year Democratic incumbent Sen. Alan Bible announced his retirement, Republican political insiders pressed Laxalt to re-enter politics and seek the open U.S. Senate seat. He eventually agreed and wound up running against the Democratic nominee, then-Lt. Gov. Harry Reid. At that time the Watergate scandal was a burden for all Republicans running for national office in 1974. Nonetheless, early in the campaign, Laxalt enjoyed a consistent but tight lead on Reid in most polls. However, after President Gerald Ford pardoned former President Richard Nixon, Laxalt's prospects, like Republican prospects everywhere, suddenly took a dramatic turn for the worse. Laxalt compared it to having "a hundred pound weight around my neck." Still, he managed a victory by fewer than one thousand votes. To give Laxalt a leg-up in seniority, Sen. Bible resigned three weeks early on December 18, 1974. Gov. Mike O'Callaghan (Laxalt's successor as governor) appointed Laxalt to finish out Bible's term.

It was the 1976 Republican presidential race that may have cemented the tight political friendship between Laxalt and former-Gov. Reagan. In 1976, Reagan had decided to run for President, challenging President Gerald Ford for the Republican nomination. Ford enjoyed widespread support among the Republican establishment, particularly in Washington, D.C. Reagan decided that having Laxalt serve as his national chairman would give his campaign credibility it was otherwise lacking. Although Laxalt was not well-known on a national level, he was well liked and respected in the U.S. Congress, and he was similarly respected by many prominent members of the national media. Laxalt eventually acceded to Reagan's request, even though doing so severely jeopardized his relationship with the Ford White House. Laxalt campaigned all over the United States on behalf of Reagan, often campaigning by his side.

In his first term in the United States Senate, Laxalt was active in many legislative battles. In 1977, he led the fight against President Jimmy Carter's proposal to transfer the Panama Canal to the Panamanian government. Despite being in the minority in the Senate, Laxalt helped build a coalition opposed to the Panama Canal Treaties. Opponents successfully built a grassroots campaign designed to put pressure on the Senate. On the day of the vote, Laxalt was confident that he would be able to secure the 34 votes needed to defeat the treaties. However, his colleague, Sen. Howard Cannon (also from Nevada), decided to support the treaties. Even in defeat, Laxalt had won plaudits from both sides of the aisle for the manner in which he led the opposition. Indeed, throughout his Senate tenure, Laxalt remained popular among his colleagues, principally because he was viewed as a "straight shooter" and someone who never allowed political differences to turn personal. He was good friends with conservative Sen. Jesse Helms from North Carolina and liberal Sen. Ted Kennedy from Massachusetts. (At the request of Sen. Kennedy, Laxalt arranged to have President Ronald Reagan present Ethel Kennedy with the original copy of the medal honoring her late husband Robert F. Kennedy.)

With his back to the wall, Reagan won shocking victories in North Carolina and Texas, which propelled the race all the way to the national convention in Kansas City. Laxalt nominated Reagan at the convention. Eventually, the Reagan campaign lost a key procedural vote to Ford and the sitting President eked out a victory. Although he was on the losing side, Laxalt's national profile increased dramatically as a result of his efforts on behalf of Reagan. When Reagan defeated Democratic incumbent President Jimmy Carter in 1980, with Laxalt again serving as national chairman of Reagan's campaign, Laxalt's profile rose even higher.

During Laxalt's two terms in the U.S. Senate, he served on several influential committees, including the Labor and Public Welfare Committee, the Appropriations Committee, and the Judiciary Committee. When Republicans took control of the Senate in 1981, Laxalt became chairman of the Judiciary Committee's Regulatory Reform Subcommittee, and the Appropriations Committee's State, Justice and Commerce Subcommittee. In 1986, while serving on the Judiciary Committee, Laxalt played a key behind-the-scenes role in securing the committee's approval of President Reagan's nomination of then-Associate Justice william Rehnquist for Chief Justice of the Supreme Court. Negotiating principally with Sen. Ted Kennedy and Sen. Joe Biden from Delaware, Laxalt was able to strike a deal that allowed the committee to vote on the nomination. Rehnquist was subsequently approved by the full Senate by a margin of 65–33.

Laxalt was a partner in the New York City-based law firm of Finley, Kumble, Wagner, Underberg, Manley, Myerson & Casey and its successor law firm, Laxalt, Washington, Perito & Dubuc. He later formed a small government consulting firm known as The Paul Laxalt Group. After his retirement from the U.S. Senate, Laxalt was named by President George H. W. Bush to a prestigious deficit reduction panel that consisted of current and former members of Congress and other prominent Americans. The commission eventually deadlocked on how best to address federal budget deficits. Paul Laxalt was honored in various ways both during and after his public Service career. The Paul Laxalt Mineral Engineering Center, an $11 million building that was completed in 1983, has been described as a giant step forward for the University of Nevada-Reno and the School of Mines. The 60,000-square-foot building houses classrooms and laboratories for mining engineering, chemical and materials engineering, and geological sciences. The Paul Laxalt State Building in Carson City was formerly the U.S. Post Office (built in 1891) and the first Federal building erected in Nevada. It is located in the center of the Carson City's Historic District.

Laxalt retired from the Senate in 1987 and was replaced by the man he had defeated in 1974, Harry Reid, who would go on to become the Senate Majority Leader and the longest-serving U.S. Senator from Nevada. Laxalt made a brief run for the Republican presidential nomination for the 1988 election in 1987. The campaign lasted only four months after Laxalt determined that the effort had fallen short of its fundraising goals. Political commentators at the time concluded that he had waited too long to enter the race, which meant that not only did his competitors have a leg up in organization, but also many of the top political strategists and fundraisers had already signed on with other camps. He was eventually named a co-chairman of George H. W. Bush's successful presidential campaign. Eight years later, he served in a similar capacity in Bob Dole's failed presidential bid in the 1996 election.

In March 1988, after an extensive review, the judges awarded Laxalt $647,452.52 in fees and costs. One of the panelists, former U.S. Attorney General Griffin Bell, who had served under President Jimmy Carter, said that he would have preferred awarding $2 million, but he felt the final amount was "fair." The Washington Post described the judges' decision as a "slap" at the Bee newspapers. Laxalt was quoted as saying that the case had proven the Bee's allegations to be without basis.

On August 2, 2012, Governor Sandoval issued a proclamation declaring that date, Laxalt's 90th birthday, as "Paul Laxalt Day" in the state of Nevada.