Educated at the University of Kristiania (Oslo), Lie practiced law and became a leading member of the Norwegian Labour Party (Arbeiderpartiet). After the German invasion of Norway in April 1940, he was appointed foreign minister of the Norwegian government-in-exile in London.

On Feb. 1, 1946, Lie was elected UN secretary general for a term of five years. He first was nominated (by Andrey A. Gromyko of the Soviet Union) for president of the General Assembly, a less important office, but was defeated by Paul-Henri Spaak of Belgium. One of Lie's first tasks was helping to secure the evacuation of Soviet troops from northern Iran. From May 1947 he had to deal with the war in Palestine that followed the proclamation of the state of Israel and throughout 1948 with the Indian–Pakistani conflict over Kashmir. Only temporary solutions were found to these problems.

In 1950 Lie undertook a “peace mission” to the capitals of the great powers, promoting a “20-Year Peace Program” and trying to resist the Soviet attempt to expel Nationalist China from the UN. Also in 1950 he urged that the UN admit the People's Republic of China (Communist China).

After UN armed forces had been authorized to aid the Republic of Korea (South Korea; June 27, 1950), Lie was subjected to official hindrance and personal insult by the Soviet Union. When it became certain that the Soviet Union would veto his reelection in the Security Council, his term was extended for three years (without formal reelection) by the General Assembly. The Soviet Union thereupon ceased to recognize him as secretary general. He also encountered opposition in the United States as a result of the investigations led by Sen. Joseph R. McCarthy against suspected Communists in the UN. Lie's secretariat was accused of giving jobs to disloyal U.S. citizens, but no charge of subversion of the United States within the UN could be proved.

His mediatory work having become nearly impossible, Lie resigned his office on Nov. 10, 1952. His book In the Cause of Peace was published in 1954. Lie subsequently served as county governor (fylkesmann) of Oslo and Akershus (1955–63); as minister of industry (1963–64); and as minister of commerce (1963–65).