Born in Philadelphia, Pennsylvania, he graduated from La Salle College High School and received a B.S. in international relations from St. Joseph's University in 1964, gained a B.A. and M.A. from Gonville & Caius College, Cambridge and went on to earn a Ph.D. from the University of Pennsylvania.

He is a first cousin, once removed, of the late Grace Kelly (Princess Grace of Monaco), and is Chairman of the Princess Grace Foundation-USA, a public charity established after Princess Grace's death to support emerging artists in film, dance, and theater. He led the American delegation to the funeral of Prince Rainier. He and his family live in Bucks County, Pennsylvania, and Manhattan.

Lehman served in the Air Force Reserve for three years while at Cambridge, then in 1968 left the Air Force Reserve and joined the United States Navy Reserve (then known as the U.S. Naval Reserve) as an ensign, later rising to the rank of commander. Lehman worked for UBS AG, then later was president of Abington Corporation, from 1977 to 1981, when he was appointed Secretary of the Navy. As the 65th Secretary, Lehman launched the idea of building a "600-ship Navy". He became Secretary of the Navy at 38, a young age that he was conscious of in his dealing with Admirals. He was unique in still serving as a Commander in the Naval Reserve while being Secretary of the Navy. He developed a strategic concept to counter the threat of Soviet incursion into Western Europe known as the "Lehman Doctrine." The plan called for a military response to any Russian invasion in Europe by attacking and invading the Soviet Far East along the Pacific, a much less defended front. Forces would sever the trans Siberian railroad and fight westward toward Moscow.

According to Hedrick Smith, in his book The Power Game, Lehman, after losing a fight at the Pentagon with Deputy Secretary of Defense Paul Thayer over lowering the number of aircraft carriers planned, played the Washington power game. He immediately went to the White House where they were unaware of Thayer's decision, then obtained a press release declaring President Reagan had named two of the ships and , thereby endorsing the "600 ship fleet" and protecting Lehman. Lehman was important in the forced retirement of Admiral Hyman G. Rickover. Lehman resigned in 1987. He was subsequently promoted to the rank of captain in the U.S. Naval Reserve in 1989, later retiring from the U.S. Navy as a reserve officer in that rank after 30 years of service.

, Lehman is chairman of the private equity investment firm J. F. Lehman and Company, as well as chairman of the controversial Hawaii Superferry. Lehman is chairman of the board of OAO Technology Solutions Inc. He is also an honorary member of the First Troop Philadelphia City Cavalry, the oldest military unit in continuous service to the Republic of the United States. , he is a member of a number of influential conservative American thinktanks, including the Project for the New American Century, the Heritage Foundation, the Foreign Policy Research Institute, the Center for Security Policy, and the Committee on the Present Danger.

After his work in the 9/11 Commission in 2002, there was increased speculation that Lehman might be named to a chief security post within the Bush administration. Positions suggested included Director of Central Intelligence, Director of National Intelligence and Secretary of Defense (when Donald Rumsfeld stepped down). None of this speculation has proved accurate. He currently serves as Chairman of the Princess Grace Foundation-USA and as a director of the OpSail Foundation. He is also a member of the Board of Overseers of the School of Engineering at the University of Pennsylvania, and is a trustee of La Salle College High School.[1] Additionally, Lehman is an Advisory Board member for the Partnership for a Secure America, a not-for-profit organization dedicated to recreating the bipartisan center in American national security and foreign policy.