Moussawi was born into a Shia family in the village of Al-Nabi Shayth in the Beqaa Valley in Lebanon in around 1952. He spent eight years studying theology in a religious school in Najaf, Iraq, where he was deeply influenced by the views of Iranian Ruhollah Khomeini. Moussawi was a student, at the hawza in Najaf, of Grand Ayatollah Sayyid Mohammad Baqir al-Sadr, an influential Shi'a cleric, philosopher, political leader, and founder of the Da'wa Party of Iraq.
al-Moussawi returned to Lebanon in 1978. Along with Subhi al Tufayli he spearheaded the formation of Hezbollah movement in the Beqaa Valley in 1982, one of the three major areas of Shia population in Lebanon. From 1983 to 1985 he is reported to have served as operational head of the Hezbollah Special Security Apparatus. From late 1985 until April 1988 he was head of Hezbollah's military wing, the Islamic Resistance.
According to some reports (while others attribute the act to Subhi al-Tufayli), al Musawi was responsible for the abduction of Lt. Col William Higgins while commander of Hezbollah's Islamic Resistance, (military wing).
In 1991, The Hezbollah had entered a new era with the end of both the Iran–Iraq War and Lebanese Civil War, the Taif Agreement and the release of the Kuwait 17 bombers. A new leader was thought to be needed to facilitate the release of the Western hostages held by Hezbollah and more importantly to shift Hezbollah's focus to resistance activity against Israel.
Al Moussawi also promised to "intensify [Hezbollah] military, political and popular action in order to undermine the peace-talks." He did not support entering mainstream politics. Unlike other Hezbollah figures, he advocated the acceptance of Taif Agreement, which was the rejection of theocratic state in Lebanon.
On 16 February 1992, Israeli Apache helicopters fired missiles at the motorcade of al Moussawi in southern Lebanon, killing al Moussawi, his wife, his five-year-old son, and four others. Israel said the attack had been planned as an assassination attempt in retaliation for the kidnapping and death of missing Israeli servicemen in 1986 and abduction of US Marine and UN peace-keeping officer William R. Higgins in 1988.
In retaliation, the Islamic Jihad Organization carried out the Israeli Embassy attack in Buenos Aires. After the attack, the Islamic Jihad Organization declared that it was carried out for the revenge of the martyr infant Hussein, al Musawi's five-year-old son, who had been killed with his father. Later it was revealed by Dieter Bednarz and Ronen Bergman that the original plan of Israel had been just to abduct al Musawi to realize the release of Israeli prisoners. However, Ehud Barak, then Israeli chief of staff, convinced then Israeli Prime Minister Shamir to order his assassination.
Al Musawi was succeeded as Secretary General of Hezbollah by Sayyed Hassan Nasrallah.