Itō's father was an adopted son of a modest samurai (warrior) family in the Chōshū domain of western Japan, and Itō grew up amid convulsive political conditions surrounding the decline of the Tokugawa shogunate—which had governed Japan since 1603—and the rise of Western influence in the country. He played a minor role in the events leading to the Meiji Restoration (1868), the movement that overthrew the shogunate and reestablished the formal ruling authority of the emperor. This brought him into contact with men like Kido Takayoshi, who was to become one of the great leaders of early Meiji Japan and who was Itō's most important mentor in those years.

Itō's talents were apparent even before the restoration, and the leaders of Chōshū sent him to England (along with his friend Inoue Kaoru) to study Western naval science (1863). His connections with Kido and Ōkubo Toshimichi, the other giant of early Meiji Japan, enabled him to undertake government assignments to the United States and the Iwakura Mission to Europe (1870, 1871–73) to study and work on matters as diverse as taxation and budgetary systems and treaty revision.

His political career changed decisively when Ōkubo, the most powerful man in the government, was assassinated in 1878, and Itō succeeded him as minister of home affairs. His advancement brought him into conflict with the equally talented and ambitious statesman Ōkuma Shigenobu. In a series of masterful political strokes, Itō forced Ōkuma and his supporters out of the government in 1881 and persuaded the government to adopt a constitution; by 1889 the emperor had proclaimed it, and in 1890 the national Diet was established.

Preparations for constitutional government were made with utmost seriousness. Itō, by then the most important person in the Meiji government, and other officials spent nearly one and a half years (1882–83) in Europe, notably in Germany, studying under leading constitutional scholars. The Meiji constitution, Itō's greatest handiwork, has been criticized for perpetuating authoritarian rule because the guarantees of civil rights and the Diet's powers were hedged by restrictions. Actually, given the Meiji leaders' samurai background and the tense domestic and foreign problems they faced, the unprecedented acknowledgment in writing of basic rights and the establishment of the Diet were progressive and enlightened acts. It should also be noted that neither Itō nor any of the Meiji leaders ever pointed to these tensions and difficulties as an excuse for reverting to tight authoritarian control.

Itō's preeminence continued in the 1890s. In mid decade, as prime minister, he helped Japan attain two important successes. The first was an agreement with Great Britain (signed in 1894) for doing away with extraterritoriality by 1899 (i.e., from that date British nationals in Japan would be subject to Japanese law). That pact was followed by others with other major Western countries. The second achievement was Japan's victory over China in 1895; both accomplishments were among the first clear signs that Japan, alone among non-Western countries, had achieved success in modernization and a weightier role in East Asian affairs.

Domestically, Itō did not fare as well. He had felt, along with other genro, that party politicians were incapable of dealing dispassionately with Japan's welfare and destiny; and, indeed, the powers guaranteed by the Meiji constitution enabled the political parties to impede government programs in the Diet. Itō unhappily, but with characteristic flexibility, continually worked out compromises with the parties until by 1900 no cabinet could be formed without their tacit consent. From the start the parties had been cooperating with the government in return for cabinet positions and laws favouring party growth. Itō made one last move to salvage the situation by leaving the government and forming the Rikken Seiyūkai (“Friends of Constitutional Government”), which he based on an older antigovernment party, the Kenseitō (“Constitutional Association”). The Seiyūkai became the first party to control an absolute majority in the House of Representatives during a Diet session, which led Itō to believe that he had finally created the right conditions for smooth passage of government programs. He did not count on the obstructive tactics of the House of Peers, however, whose conservative members were unhappy with Itō's alliance with the parties. Ironically, Itō had originally created the House of Peers to balance what he considered the less-than-responsible House of Representatives. Finally, embittered with the knowledge that dealing with party members, each with his own constituency to answer to, was infinitely more difficult and distasteful than working with a handful of genro, all of the same background and inspiration, he resigned as president of the Rikken Seiyūkai in 1903. But Itō paid for having broken genro ranks; soon afterward Yamagata Aritomo, founder of the modern Japanese army, became the leading power among the powerful genro.

Itō's legacy, however, cannot be denied, for he made cooperation between high-ranking bureaucrats and party politicians respectable, which provided an alternative to the unremitting and unproductive polarization of these two groups. Moreover, the continued commitment of the other genro to the Meiji constitution made party growth inevitable.

In 1905, following the Russo-Japanese War, Itō was sent to Korea to negotiate the treaty that turned Korea into a Japanese protectorate. He returned there as resident general (1906–09), where he pursued a gradualist policy of economic and bureaucratic reform. However, he increasingly sought to suppress Korean nationalism (including engineering King Kojong's abdication), and he could not prevent the thrust toward annexing Korea favoured by other leaders in Japan. In October 1909 he was shot in Harbin in North China by An Chung-gŭn, a member of the Korean independence movement. His last words on being told that he was the victim of a political assassination were, “Baka na yatsu ja!” (“He is a fool!”). Itō probably meant that An had killed the one Japanese leader who had a moderating and sympathetic approach for Japan's Korea policy. Indeed, Itō's assassination was a factor contributing to Japan's annexation of Korea in 1910.

Itō was honoured with a state funeral. Despite his unquestioned contributions to the modernization of Japan, he has never been first in the hearts of his countrymen. The Japanese more often have favoured their romantic heroes, usually losers of great military causes. His private life also prevented his enshrinement in ethics textbooks as a paradigm for young Japanese. He is remembered instead for a boast: “Drunk, I (relax) with my head on a beauty's lap; awaken (refreshed), I grip the reins of power.” His violent death was also ironic: he was never the strong-willed statesman that Ōkubo, Ōkuma, and Yamagata were. He sought the compromiser's role, the harmonious solution. His enduring monument was the creation of a viable constitutional system. It enabled the Japanese to effect orderly, evolutionary, peaceful political change accompanied by an ever-widening scope for meaningful popular participation.