Dhulia, who has his roots in the hills of Uttarakhand was born and raised in Allahabad, Uttar Pradesh, India, where his father was a judge at the Allahabad High Court and a secretary of the Students' Federation of India, student wing of the CPM, while his mother was a professor of Sanskrit. He is the youngest of three brothers, one later joined the Navy, while the other became a judge at the Uttarakhand High Court . He attended St. Joseph's College, Allahabad and Anglo Bengali Intermediate College, then Allahabad University where he majored in English, Economics and Modern History. During his studies here, he joined and became a member of the pro-Left Progressive Students' Organisation. After graduating in 1986 he took a master's degree in Theatre at the National School of Drama in New Delhi, completing the course in 1989.

In 1990 he moved to Mumbai where he worked as casting Director on the film Bandit Queen, a biopic of Phoolan Devi. He was casting Director for 1995's Stiff Upper Lips, in which he also had a cameo role as a stallholder, and 2000's The Warrior, directed by Asif Kapadia. Dhulia started his direction career, by assisting Pradip Krishen in Electric Moon (1992) and Ketan Mehta in Sardar (1993). Thereafter he turned to television, thus during the 90s Dhulia directed and produced several television programs, including the six-part Krishna's Dream for UK Channel Four. Kahani Ek Kanya Ki (1991) was written for Doordarshan, and Hum Bambai Nahin Jayenge (1993), for BI Television, was set in an acting school. 1996's Just Mohabbat was the story of a boy's coming-of-age, and Naya Daur (1995) adapted a classic Hindi novel by Bhagwati Charan Verma for Zee TV.

Dhulia's 1999 series Star Bestsellers, a sequence of six 45-minute short stories ("Ek Sham Ki Mulaqat", "Fursat Main", "Hum Saath Saath Hain Kya", "Anekon Hitler", "Musafir", and "Bhawaron Ne Khilaya Phool"), won him popular recognition. His 2005 comedy Who Dus Din, for Star TV, satirised the Indian film industry, while Ek Duje Ke Liye, produced the same year and also for Star TV, was an adaptation of Neil Simon's play The Odd Couple. He also directed the TV serial 'Rajdhaani' for Starplus featuring Neha Dhupia.

He directed his first feature film, Haasil in 2003, a love story set among politicised students in northern India. The film was critically well received and has gained a cult following. Haasil was nominated for six awards (including best directorial debut) at the Zee Cine Awards, where it won for best screenplay. His second film Charas: A Joint Operation was a thriller concerning drug cartels, shot in marijuana-growing regions of Himachal Pradesh. In 2011, Tigmanshu has come up with two films – the first one being 'Shagird which released on 13 May and the second one was Saheb, Biwi Aur Gangster.

Dhulia's film Paan Singh Tomar released on 2 March 2012 and won him wide critical acclaim including National Film Award for Best Feature Film. He has announced four other upcoming projects, Saheb, Biwi Aur Gangster Returns (2013), Milan Talkies, Jai Ramji, Bullet Raja, and Sultana Daku.

In Spring 2017, Dhulia announced plans to produce an affair-oriented film to be called Ek Purani Love Story and to star Salman Khan and Aishwarya Rai Bachchan. According to Dhulia, it is a love action comedy entertainment movie and everybody will like it.