Tsai was born in Zhongshan District, Taipei, Taiwan on 31 August 1956, the youngest of 11 children of her father. Her father, Tsai Chieh-sheng (1918-2006), was a businessman who ran an auto repair shop, her mother Chang Chin-fong (1925-2018) was a housewife. Her given name, Ing-wen (英文), could be translated as "heroic literature" or "English language". During her middle school period, she studied in Taipei Municipal Zhongshan Girls High School. She studied law at the behest of her father. After graduating at the College of Law, National Taiwan University, in 1978, Tsai obtained a Master of Laws at Cornell University Law School in 1980 and then a Ph.D. in law at the London School of Economics in 1984. Upon her return to Taiwan, she taught law at the School of Law of Soochow University and National Chengchi University, both in Taipei.

Tsai questioned Ma's stand on Taiwan's sovereign status. Ma emphasized the importance of the so-called 1992 Consensus and called Tsai a Taiwan independence extremist. Tsai criticized Ma's government for not answering her question and labeling others.

Tsai studied law and international trade, and later became a law professor at Soochow University School of Law and National Chengchi University after earning an LLB from National Taiwan University, an LLM from Cornell Law School and a Ph.D. in law from the London School of Economics and Political Science. In 1993, as an independent (without party affiliation), she was appointed to a series of governmental positions, including trade negotiator for WTO affairs, by the then-ruling Kuomintang (KMT) and was one of the chief drafters of the special state-to-state relations doctrine of then President Lee Teng-hui.

In 2000, Tsai was given the high-profile appointment of chair of the Mainland Affairs Council. Confirming the widely held belief that she maintained Pan-Green sympathies, Tsai joined the Democratic Progressive Party (DPP) in 2004. She was subsequently nominated by the DPP to be a candidate in the 2004 legislative election and was elected as a legislator-at-large.

On 26 January 2006, Tsai was appointed to the post of vice President of the Executive Yuan, a position commonly referred to as vice premier. She concurrently served as chairwoman of the Consumer Protection Commission.

On 17 May 2007, Tsai, along with the rest of the cabinet of out-going Premier Su Tseng-chang, resigned to make way for incoming Premier Chang Chun-hsiung and his cabinet. Premier Chang named Chiou I-jen, the incumbent secretary-general of the Presidential Office to replace Tsai as vice premier. She then served as the chair of TaiMedBiologics, a biotechnology company based in Taiwan. The Kuomintang accused Tsai of contracting government work out to TaiMedBiologics during her term as vice premier, while planning to leave the government and lead the company afterward. She was later cleared of all alleged wrongdoing.

Tsai took office on 20 May 2008, the same day Ma Ying-jeou was inaugurated as President. She said that DPP would work to deepen the Taiwanese localization movement while defending social justice. She criticized Ma for mentioning closer Cross-Strait relations but nothing about Taiwan's sovereignty and national security.

Under Tsai's leadership, along with some of KMT's unpopular policies, the DPP has been regaining momentum in elections since 2009, after the major defeats from 2006 to 2008. In 2010, she was re-elected as the chair of the DPP.

On 25 April 2010, Tsai participated in a televised debate against President and Kuomintang chairman Ma Ying-jeou over a proposed trade deal with China. While President Ma believed that the agreement with mainland China, called the Economic Cooperation Framework Agreement (ECFA), would increase Taiwanese exports to China and lower unemployment rates, Tsai said it "will force Taiwan to open up for cheap Chinese exports eventually" and certain domestic industries will be harmed by the mainland trade invasion. Tsai also said that the pact "will make Taiwan lose its independence in cross-strait relations and become a Chinese parasite" and that Taiwan should negotiate with China under the multilateral-framework World Trade Organization, which would offer more trade protections and emphasize Taiwan's distinct status.

On 11 March 2011, Tsai Ing-wen officially announced her run for the presidential nomination of the Democratic Progressive Party. On 27 April 2011, Tsai became the first female presidential candidate in Taiwan after she defeated former Premier Su Tseng-chang by a small margin in a nationwide phone poll (of more than 15,000 samples) that served as the party's primary. Tsai ran against incumbent President Ma Ying-jeou of the Kuomintang and James Soong of the People First Party in the 5th direct presidential election, which was held on 14 January 2012. Garnering 45% of the vote, she conceded defeat to President Ma in an international press conference, resigning her seat as Chairman of the DPP.

During the 2012 presidential election cycle, Tsai said that she disagreed with the 1992 Consensus as the basis for negotiations between Taiwan and mainland China, that such a consensus only served to buttress the "One China Principle", and that "no such consensus exists" because the majority of the Taiwanese public does not necessarily agree with this consensus. She believed that broad consultations should be held at all levels of Taiwanese society to decide the basis on which to advance negotiations with Beijing, dubbed the "Taiwan consensus". During the 2016 election cycle, Tsai was notably more moderate, making "maintaining the status quo" the centerpiece of party policy. She vowed to work within the Republic of China governing framework in addition to preserving the progress made in cross-strait relations by previous governments, while preserving "freedom and democracy" for the residents of Taiwan.

Tsai led the DPP to a historic victory in the local elections held on 29 November 2014, in which the party secured leadership of 13 of Taiwan's 22 municipalities and counties. The DPP's stunning victory in the elections strengthened Tsai's position within the party and placed her as the front-runner in the 2016 Presidential Elections; she announced her second bid for the Presidency on 15 February 2015. On 16 January 2016, she won the election by a landslide, winning 56.12% of votes, beating her opponent Eric Chu, who won 31.07% of the votes.

Tsai supports LGBT rights and endorsed same-sex marriage to be legalised in Taiwan. On 21 August 2015, which is the Qixi Festival (comparable to Valentine's Day), she released a campaign video in which three same-sex couples actors appeared. On 31 October 2015, when the biggest gay pride parade in Asia was held in Taipei, Tsai expressed her support for same-sex marriage. She posted a 15-second video on her Facebook page saying "I am Tsai Ing-wen, and I support marriage equality” and "Let everyone be able to freely love and pursue happiness”.

Tsai supports strong and stable relationships between Taiwan (ROC) and the United States. In early December 2016, Tsai held an unprecedented telephone call with President-elect Donald Trump. This was the first time that the President of ROC spoke with the President or president-elect of the United States since 1979. Afterwards, she indicated there had been no major "policy shift".