He was the second son of Zhou Jiannan, an early member of Chinese Communist Party and its secret Service. The elder Zhou was the head of Electric and Industrial Bureau of the North East district in 1949 and Vice Minister of the First Department of Machinery Development in 1961. After the Cultural Revolution, the Father served as Minister of Machine Industry, Vice Chairman of National Commission of Import and Export, and adviser to the Commission of Financial and Economic Affairs. Zhou's Father was also one of the promoters of Jiang Zemin in his early career was and said to be one of Jiang's mentors.

During the early days of the Cultural Revolution, he worked at a Production and Construction Corps in Heilongjiang province from 1968 to 1972. He was sent to the Beijing Institute of Chemical Technology as a Gong Nong Bing Student (students selected from workers, farmers and military, a Common practice of college admissions in the Cultural Revolution) in 1972. After graduating from college in 1976, he was assigned to Beijing Research Center of Automation as an Engineer studying large automation systems.

Zhou Xiaochuan graduated from Beijing Institute of Chemical Technology (now Beijing University of Chemical Technology) in 1975 and received a PhD degree in Automation and System Engineering from Tsinghua University in 1985. From 1987 to 1988, he was a visiting scholar at the University of California, Santa Cruz.

Between 1978 and 1985, he was studying for master's degree in Industrial Application of System Engineering in China Academy of Machinery Science and Technology and Ph.D in Science in Tsinghua University.

In 1986, he started working in the State Council of the People's Republic of China on economic restructuring as a member of the Economic Policy Group of the State Council and Deputy Director of the Institute of Chinese Economic Reform Research. He served as Assistant Minister of Foreign Trade from 1986 to 1989 and between 1986 and 1991, he was also a member of the National Committee of Economic Reform. Before the Tiananmen Square protests of 1989, Zhou was an associate and protégé of Zhao Ziyang, General Secretary of the Communist Party of China.

Between 1991 and 1995, he was executive Director and vice President of Bank of China. From 1995, he assumed the position of Administrator of State Administration of Foreign Exchange. From 1996 to 1998, he served both as Deputy Governor of the People's Bank of China and Administrator of the State Administration of Foreign Exchange.

During 1998 to 2000, he served as President of the China Construction Bank and oversaw the creation of asset-management companies charged with working out the banking system's bad debt. He also played a part in managing China's vast foreign exchange reserves.

From 2000 to 2002, Zhou was the chairman of the China Securities Regulatory Commission. Whilst there, he earned the nickname Zhou "Bapi" (周扒皮), Zhou "the flayer". He targeted corruption in listed companies, angering many small shareholders, who saw their shares fall. In July 2001, Zhou declared his intention to reduce state ownership in the stock market. The stockmarket quickly went into freefall, forcing him to abandon his plans that October. He emphasized the role of market mechanisms, worked to reduce red tape and aimed to protect Retail Investors.

In December 2002, he was appointed to his present position by Premier Zhu Rongji as governor of the People's Bank of China and also took over the position of chairman of monetary policy committee of the People's Bank of China from January 2003. In 2010, he was serving his second five-year term.

Zhou had been suggested as a Future premier, but some consider that he did not have the political experience. On January 15, 2006, however, the Financial Times of London called him "a rising political star and widely expected to be promoted to vice-premier in the next major reshuffle of top party and government posts, due in late 2007 and early 2008." That did not materialise, however, with the post instead going to Vice-premier Li Keqiang.

On March 24, 2009, Zhou gave a speech, "Reform the International Monetary System". He argued that the ongoing financial crisis was made more severe by inherent weaknesses of the current international monetary system and called for a gradual move towards using IMF special drawing rights (SDRs) as a centrally managed global reserve currency. He argued that it would address the inadequacies of using a national currency as a global reserve currency, particularly the Triffin dilemma, the dilemma faced by issuing countries in trying to simultaneously achieve their domestic monetary policy goals and meet other countries' demand for reserve currency. Zhou explained global currency diversification was needed because an overconcentration of foreign assets denominated in the dollar may bring about undesired consequences. Zhou argued that it was regrettable that John Maynard Keynes's "farsighted" bancor proposal was not adopted at Bretton Woods in the 1940s.

During a March 5, 2013 meeting of the National People’s Congress and the Chinese People's Political Consultative Conference, Zhou announced the People's Bank of China would deal with the "ramifications of the excessive money supply and will gradually control the new money supply" because of the 2008 fourth quarter financial crisis.

In September 2015, Zhou addressed the G-20 Finance meeting in Ankara about the sharp, sustained drop in the Chinese stock market in 2015 and said that the "correction in the stock market is almost done."

In October 2017, Zhou named three reforms he believed were crucial for China's economic future: scrapping capital account controls, letting the market freely decide the yuan's value, and embracing free trade and investment.

Zhou has previously held leading posts in trade and Finance organizations, serving as Vice-Governor of the People's Bank of China, Director of the State Administration of Foreign Exchange, Governor of China Construction Bank, and Chairman of the China Securities Regulatory Commission. He retired in 2018 after serving for several years past the typical retirement age for officials of his rank.