Taapsee was born on 1 August 1985 in New Delhi. She has a sister named Shagun Pannu and plans to launch her into films as well. She did her schooling at the Mata Jai Kaur Public School in Ashok Vihar, Delhi. After completing her graduation in Computer Science Engineering from the Guru Tegh Bahadur Institute of Technology in New Delhi, she worked as a software Engineer. She became a full-time model after she auditioned and was selected for Channel V's talent show Get Gorgeous, which eventually led her to acting. Taapsee has appeared in numerous print and television commercials and won several titles during her modelling days, including "Pantaloons Femina Miss Fresh Face" and "Safi Femina Miss Beautiful Skin" at the 2008 Femina Miss India contest. As a model, she endorsed brands such as Reliance Trends, Red FM 93.5, UniStyle Image, Coca-Cola, Motorola, Pantaloon, PVR Cinemas, Standard Chartered Bank, Dabur, Airtel, Tata Docomo, World Gold Council, Havells and Vardhman. She has also been featured on the cover of magazines Just For Women and MaaStars. After a few years, she lost interest in modelling as she thought that she could never gain proper recognition through modelling, but only through films, and finally decided to act.

Taapsee made her cinematic debut in 2010 with K. Raghavendra Rao's romantic musical Jhummandi Naadam. She played the role of the daughter of a US–based millionaire who comes to India to research traditional Telugu music. Taapsee got three more offers in Telugu prior to the film's release. Her next film Aadukalam (2011), marked her debut in Tamil cinema. She played the role of an Anglo-Indian girl falling in love with a rural man played by Dhanush. The film, set in the backdrop of Madurai, revolves around cockfights. It was critically acclaimed and proceeded to win six National Film Awards at the 58th National Film Awards ceremony. Speaking about her role, a reviewer from Sify said: "Debutant Taapsee is a promising find and she suits the character of an Anglo-Indian girl to the T." She returned to the Telugu film industry with Vastadu Naa Raju (2011), opposite Vishnu Manchu. She made a foray into Malayalam cinema later that year, with Doubles (2011), opposite Mammootty and Nadiya Moidu. Paresh C Palicha of Rediff commented: "Taapsee Pannu as Saira Banu, whose entry into the scene becomes the bone of contention between the siblings, has nothing noteworthy to do".

Taapsee played a short role in her next release Mr. Perfect (2011). In it, she acted alongside Prabhas and Kajal Aggarwal and the film was a moderate success. She starred in a high budget film titled Veera (2011), opposite Ravi Teja and Kajal Aggarwal, which received moderate reviews. She was next seen in her second Tamil film Vandhaan Vendraan, that fetched mixed reviews and did not fare well at the box office. Her next film was Krishna Vamsi's Mogudu where she acted as a traditional Telugu girl opposite Gopichand and garnered critical acclaim for her performance. She worked on the Tamil–Telugu bilingual Gundello Godari—titled Maranthen Mannithen in Tamil— apart from Daruvu and Shadow. She also made her Bollywood debut through Chashme Baddoor where she shares the screen with Siddharth, Rishi Kapoor, Divyendu Sharma and Ali Zafar. The film is a remake of the 1981 film with the same title. Taapsee was also approached to dub the voice of Hollywood Actress Katee Sackhoff in the Tamil, Telugu and Hindi versions of the science fiction film Riddick, but declined the offer due to her prior commitments. In later 2013, she was seen in the big budget action thriller Arrambam co-starring Ajith Kumar and Arya. She was awarded Most Enthusiastic Performer–Female Award at the 2014 Edison Awards for her performance in the film.

When asked in January 2015 about her personal relationships, Taapsee said: "I have dated a South Indian. Also I have never dated a star and will never date one and that I can write and give you on a stamp paper. I am clear that there can be only one star in the relationship and that's me. I personally don't think it can work out between an actor and an Actress."

After finishing Baby, Taapsee joined Shoojit Sircar's next film, titled Pink, and the bilingual submarine film Ghazi, to be directed by debutant Sankalp. She is also working on Prakash Raj’s Hindi directorial debut Tadka. She next appeared in the film Naam Shabana, the prequel of Baby. Later, Taapsee worked in David Dhawan–directed Judwaa 2.