Lipset was born in New York, the son of Russian Jewish immigrants. He graduated from City College of New York, where he was an anti-Stalinist leftist and later became national chairman of the Young People's Socialist League. He left the Socialist Party in 1960 and described himself as a centrist, deeply influenced by Alexis de Tocqueville, George Washington, Aristotle, and Max Weber. Lipset received a doctorate in sociology from Columbia University in 1949. Before that he taught at the University of Toronto.

He was the Caroline S.G. Munro Professor of Political Science and Sociology at Stanford University (1975—1990) and the George D. Markham Professor of Government and Sociology at Harvard University. He also taught at Columbia University, the University of California, Berkeley and the University of Toronto. Lipset received the MacIver Prize for Political Man (1960) and the Gunnar Myrdal Prize for The Politics of Unreason. His book The First New Nation was a finalist for the National Book Award. He was also awarded the Townsend Harris and Margaret Byrd Dawson Medals for significant achievement, the Northern Telecom-International Council for Canadian Studies Gold Medal, and the Leon Epstein Prize in Comparative Politics by the American Political Science Association. He has received the Marshall Sklare Award for distinction in Jewish studies. In 1997, he was awarded the Helen Dinnerman Prize by the World Association for Public Opinion Research.

Lipset was a member of the National Academy of Sciences. He was the only person to have been president of both the American Sociological Association (1992—93) and the American Political Science Association (1979—80). He also served as the president of the International Society of Political Psychology, the Sociological Research Association, the World Association for Public Opinion Research, and the Society for Comparative Research. He was also the president of the Paul F. Lazarsfeld Society in Vienna.

His publications include American Exceptionalism: A Double-Edged Sword (W.W. Norton, 1996) and Continental Divide: The Values and Institutions of the United States and Canada (Routledge, 1990), and with Earl Raab Jews and the New American Scene (Harvard University Press, 1996).

Lipset was active in public affairs on a national level. He was a director of the United States Institute of Peace. He has been a board member of the Albert Shanker Institute, a member of the U.S. Board of Foreign Scholarships, co-chair of the Committee for Labor Law Reform, co-chair of the Committee for an Effective UNESCO, and consultant to the National Endowment for the Humanities, the National Humanities Institute, the National Endowment for Democracy, and the American Jewish Committee.

He was president of the American Professors for Peace in the Middle East, chair of the National B'nai B'rith Hillel Commission and the Faculty Advisory Cabinet of the United Jewish Appeal, and cochair of the Executive Committee of the International Center for Peace in the Middle East. He worked for years on seeking solution for the Israeli Palestinian conflict. This was part of his larger project of researching what factor allow societies to sustain stable and peaceful democracies. His work focused on the preconditions to democracy -- especially high socioeconomic development--(see also Amartya Sen's work)--and the consequences of democracy for peace.

Lipset's first wife, Elsie, died in 1987. With her, he had three children: David, Daniel, and Cici. David Lipset is Professor of Anthropology at the University of Minnesota. In addition to his three children, and six grandchildren, Lipset is survived by his second wife, Sydnee, whom he married in 1990.

Besides making substantial contributions to cleavage theory, with his partner Stein Rokkan, Lipset was one of the first proponents of the "theory of modernization", which holds that democracy is the direct result of economic growth.

“The more well-to-do a nation, the greater the chances that it will sustain democracy.”

"Those who only know one country know no country."