Born into a landlord family in Henan province, Zhao joined the Young Communist League in 1932 and became a member of the Chinese Communist Party (CCP) in 1938. He served in local party organizations in northern China during the Sino-Japanese War (1937–45). After the establishment of the People's Republic in 1949, he was moved to Guangdong province in the south, where he became provincial first party secretary in 1965. Purged in 1967 during the Cultural Revolution, he was later rehabilitated and sent as first party secretary in 1975 to Sichuan, China's most populous province, where he greatly increased industrial and agricultural production. These results were achieved through innovative policies such as rewarding workers on the basis of work performance rather than need and relying on material incentives that encouraged individual initiative rather than on quotas set by central authorities. In addition, factory managers were given much greater autonomy, and peasants were allowed to expand their private plots of land. Such achievements caught the attention of Deng Xiaoping, the de facto leader of the CCP; Zhao was quickly made a Political Bureau (Politburo) alternate in 1977 and a full member in 1979, becoming a member of that body's powerful Standing Committee in February 1980.

Early in 1980 he was also appointed vice premier and then, in September, premier, replacing Hua Guofeng. An economic experimenter, Zhao advocated “any structure, system, policy, or measure” that might stimulate the forces of production. As premier, he was able to extend his Sichuan policies to the whole of China. Thousands of industrial enterprises were given limited self-management, and peasants achieved increased control over and responsibility for their production and profits. Throughout the 1980s Zhao's pragmatic measures led to rapid increases in both agricultural and light industrial production, and his policies became the guiding principles for China's future economic development. Zhao was appointed acting general secretary of the CCP after Hu Yaobang was forced to resign from that office in January 1987. In November he officially became general secretary, with Li Peng taking over the premiership. As general secretary, Zhao continued to favour loosening government controls over industry and to advocate creating special free-enterprise zones in China's coastal regions as a means of hastening economic development. Premier Li, on the other hand, favoured a cautious approach that relied more on government planning and guidance.

Hu Yaobang's death in April 1989 sparked large demonstrations in Beijing and elsewhere by students and others calling for political and economic reforms. The protests continued and grew in size, and the CCP leadership became split between those like Zhao who advocated a more moderate response to the demonstrators and those like Li who favoured a more hard-line approach. As the protests spread to other cities and threatened the central authority, the government imposed martial law and in early June forcibly suppressed the demonstrators in Beijing's Tiananmen Square. Zhao was formally dismissed from his top party and government posts later that month and was replaced as general secretary by Jiang Zemin. Zhao retained his party membership, but he remained essentially under house arrest until his death.