LuPone was born in Northport, New York, on Long Island, the daughter of Angela Louise (née Patti), a college library administrator, and Orlando Joseph LuPone, a school administrator. Her great-grand-aunt was the celebrated 19th-century opera singer Adelina Patti. Her brother Robert LuPone is an actor, dancer, and director. Her other brother William LuPone is a teacher. When they were young, they performed on Long Island as the LuPone Trio. She is of Italian/Abruzzese descent and a graduate of Northport High School, where she studied under the musical direction of voice coach Esther Scott. LuPone was part of the first graduating class of Juilliard's Drama Division.

In 1972, LuPone became one of the original members of The Acting Company, formed by John Houseman. The Acting Company was a nationally touring repertory theater company. LuPone’s stint with the company lasted from 1972 to 1976, and she appeared in many of their productions, such as The Cradle Will Rock, The School for Scandal, Women Beware Women, The Beggar’s Opera, The Time of Your Life, The Lower Depths, The Hostage, Next Time I’ll Sing to You, Measure for Measure, Scapin, Edward II, The Orchestra, Love’s Labours Lost, Arms and the Man, The Way of the World. She made her Broadway debut in the play The Three Sisters as Irina in 1973. For her work in The Robber Bridegroom (1975) she received her first Tony Award nomination, for Best Featured Actress in a Musical.

In 1976, producer David Merrick hired LuPone as a replacement to play Genevieve, the title role of the troubled pre-Broadway production of The Baker's Wife. The production toured at length but Merrick deemed it unworthy of Broadway and it closed out of town. Since 1977, LuPone has been a frequent collaborator with David Mamet, appearing in his plays The Woods, All Men are Whores, The Blue Hour, The Water Engine (1978), Edmond and The Old Neighborhood (1997). The New York Times reviewer wrote of LuPone in The Old Neighborhood "Those who know Ms. Lupone only as a musical comedy star will be stunned by the naturalistic fire she delivers here. As Jolly, a part inspired by Mr. Mamet's real-life sister and his realized female character, Ms. Lupone finds conflicting layers of past and present selves in practically every line. She emerges as both loving matriarch and wounded adolescent, sentimental and devastatingly clear-eyed." In 1978, she appeared in the Broadway musical adaptation of Studs Terkel’s Working, which ran for only 24 performances.

In 1979 LuPone starred in the original Broadway production of Evita, the musical based on the life of Eva Peron, composed by Andrew Lloyd-Webber and Tim Rice, and directed by Harold Prince. Although LuPone was hailed by critics, she has since said that her time in Evita was not an enjoyable one. In a 2007 interview, she stated " 'Evita' was the worst experience of my life," she said. "I was screaming my way through a part that could only have been written by a man who hates women. And I had no support from the producers, who wanted a star performance onstage but treated me as an unknown backstage. It was like Beirut, and I fought like a banshee." Despite the trouble, LuPone won her first Tony Award for Best Actress in a Musical. LuPone and her co-star, Mandy Patinkin, remained close friends both on and off the stage.

In May 1983, founding alumni of The Acting Company reunited for an off-Broadway revival of Marc Blitzstein’s landmark labor musical The Cradle Will Rock at the American Place Theatre. It was narrated by John Houseman, with LuPone in the roles of Moll and Sister Mister. The production premiered at The Acting Company's summer residence at Chautauqua Institution, toured the United States, including an engagement at the Highland Park, Illinois' Ravinia Festival in 1984, and played London's West End. When the run ended, LuPone remained in London to create the role of Fantine in Cameron Mackintosh’s original London production of Les Miserables, in 1985, which premiered at the Barbican Theatre, home of the Royal Shakespeare Company. LuPone had previously worked for Mackintosh in a short-lived Broadway revival of Oliver! in 1984, playing Nancy opposite Ron Moody as Fagin. For her work in both The Cradle Will Rock and Les Miserables, LuPone received the 1985 Olivier Award for Best Actress in a Musical.

She returned to Broadway in 1987 to star as nightclub singer Reno Sweeney in the Lincoln Center Theater revival of Cole Porter’s Anything Goes. She starred opposite Howard McGillin, and they both received Tony Award nominations for their performances. The Lincoln Center cast reassembled for a one-night-only concert performance of Anything Goes in New York in 2002, where LuPone met her future Gypsy co-star, Boyd Gaines.

In 1993, LuPone returned to London to create the role of Norma Desmond in the original production of Andrew Lloyd Webber’s Sunset Boulevard at the Adelphi Theatre. There was much anticipation of LuPone appearing in another Lloyd Webber musical, the first since her performance in Evita. Her time in the show was a happy experience until she was abruptly fired by Lloyd Webber and replaced by Glenn Close who opened the show in Los Angeles and eventually on Broadway.

In November 1995 LuPone starred in her one-woman show, Patti LuPone on Broadway, at the Walter Kerr Theatre. For her work, she received an Outer Critics Circle Award. The following year, she was selected by producer Robert Whitehead to succeed his wife, Zoe Caldwell in the Broadway production of Terrence McNally’s play Master Class, based on the master classes given by operatic diva Maria Callas at Juilliard, New York. LuPone received positive reviews in New York, with Vincent Canby writing : "Ms. LuPone really is vulnerable here in a way that wasn't anticipated: she's in the process of creating a role for which she isn't ideally suited, but she's working like a trouper to get it right."and took the play to the West End. In November 2001, she starred in a Broadway revival of Noises Off, with Peter Gallagher and Faith Prince.

LuPone has performed in numerous New York concert productions of musicals including Pal Joey with Peter Gallagher and Bebe Neuwirth, Annie Get Your Gun with Peter Gallagher, Sweeney Todd with George Hearn in both New York and San Francisco, Anything Goes with Howard McGillin, Can-Can with Michael Nouri for City Center Encores!, Candide with Kristin Chenoweth, Passion with Michael Cerveris and Audra McDonald and Gypsy with Boyd Gaines and Laura Benanti for City Center Encores!. Her performances in Sweeney Todd, Candide and Passion were all recorded and broadcast for PBS’ "Great Performances" and were all released on DVD.

Since 2001, LuPone has been a regular performer at the Chicago Ravinia Festival. She starred in a six-year-long series of concert presentations of Stephen Sondheim musicals, which began in honor of his seventieth birthday. Her roles here have included Mrs. Lovett in Sweeney Todd, Desiree in A Little Night Music, Fosca in Passion, Cora Hoover Hooper in Anyone Can Whistle, Rose in Gypsy and two different roles in Sunday in the Park with George.