Chu was born in St. Louis, Missouri, with ancestry from Liuhe, Taicang, in Jiangsu, China, and graduated from Garden City High School. He received both a B.A. in mathematics and a B.S. in physics in 1970 from the University of Rochester. He went on to earn his Ph.D. in physics from the University of California, Berkeley, in 1976, during which he was supported by a National Science Foundation Graduate Research Fellowship.

After obtaining his doctorate he remained at Berkeley as a postdoctoral researcher for two years before joining Bell Labs, where he and his several co-workers carried out his Nobel Prize-winning laser cooling work. He left Bell Labs and became a professor of physics at Stanford University in 1987, serving as the chair of its Physics Department from 1990 to 1993 and from 1999 to 2001. At Stanford, Chu and three others initiated the Bio-X program, which focuses on interdisciplinary research in biology and Medicine, and played a key role in securing the funding for the Kavli Institute for Particle Astrophysics and Cosmology. In August 2004, Chu was appointed as the Director of the Lawrence Berkeley National Laboratory, a U.S. Department of Energy National Laboratory, and joined UC Berkeley's Department of Physics and Department of Molecular and Cell Biology. Under Chu's leadership, the Lawrence Berkeley National Laboratory has been a center of research into biofuels and solar Energy. He spearheaded the laboratory's Helios project, an initiative to develop methods of harnessing solar power as a source of renewable Energy for transportation.

He is a member of the U.S. National Academy of Sciences, the American Academy of Arts and Sciences, the American Philosophical Society, and the Academia Sinica, and is a foreign member of the Chinese Academy of Sciences and the Korean Academy of Science and Engineering. He was also awarded the Humboldt Prize by the Alexander von Humboldt Foundation in 1995.

Steven Chu is a co-winner of the Nobel Prize in Physics in 1997 for the "development of methods to cool and trap atoms with laser light", shared with Claude Cohen-Tannoudji and william Daniel Phillips.

Chu received an honorary doctorate from Boston University when he was the keynote speaker at the 2007 commencement exercises. He is a Senior Fellow of the Design Futures Council. Diablo Magazine awarded him an Eco Awards in its April 2009 issue, shortly after he was nominated for Energy Secretary.

Chu faced controversy for a statement he made prior to being appointed, claiming in a September 2008 interview with the Wall Street Journal that "somehow we have to figure out how to boost the price of gasoline to the levels in Europe.” However, in March 2012 he retracted this comment, saying "since I walked in the door as secretary of Energy I’ve been doing everything in my powers to do what we can to … reduce those prices” and that he "no longer shares the view [that we need to figure out how to boost gasoline prices in America]".

He joined the Copenhagen Climate Council, an international collaboration between Business and science established to create momentum for the 2009 UN Climate Change Conference in Copenhagen, Denmark.

His scientific work continued, however, and he even published a paper on gravitational redshift in Nature in February 2010 and another one he co-authored in July 2010.

In August 2011 Chu praised an advisory panel report on curbing the environmental risks of natural-gas development. Chu responded to the panel’s report on hydraulic fracturing, the controversial drilling method that is enabling a U.S. gas boom while bringing fears of groundwater contamination. The report called for better data collection of air and water data, as well as “rigorous” air pollution standards and mandatory disclosure of the chemicals used in the hydraulic fracturing process. Chu said that he would "be working closely with my colleagues in the Administration to review the recommendations and to chart a path for continued development of this vital Energy resource in a safe manner".

On February 1, 2013, Chu announced his intent to resign. In his resignation announcement, he warned of the risks of climate change from continued reliance on fossil fuels, and wrote, "the Stone Age did not end because we ran out of stones; we transitioned to better solutions". He resigned on April 22, 2013.

Chu was elected a Foreign Member of the Royal Society (ForMemRS) in 2014. His nomination reads:

In 2015, Chu signed the Mainau Declaration 2015 on Climate Change on the final day of the 65th Lindau Nobel Laureate Meeting. The declaration was signed by a total of 76 Nobel Laureates and handed to then-President of the French Republic, François Hollande, as part of the successful COP21 climate summit in Paris.

Chu was instrumental in submitting a winning bid for the Energy Biosciences Institute, a BP-funded $500 million multidisciplinary collaboration between UC Berkeley, the Lawrence Berkeley Lab, and the University of Illinois. This sparked controversy on the Berkeley campus, where some fear the alliance could harm the school’s reputation for academic integrity.