Lysbakken is the son of actor Sigurd Lysbakken (1947–1994) and cultural worker Geirdis Bjørlo (1952). He attended primary school at Møhlenpris elementary school (1984–1993), and high school at Bergen Handelsgymnasium (1993–1996). He has university minors in French and comparative politics from the University of Bergen (1996–1998). After his university studies, he performed mandatory civil service instead of conscript military duty, and served this duty as a secretary at Norsk Økologisk Landbrukslag and as a journalist in the daily Klassekampen 2000–2001.
Lysbakken held various posts in the youth NGOs Ungdom mot EU and Nature and Youth 1995–1996, and was involved in student politics during his university studies 1998–1999. Lysbakken held his first post in Socialist Youth, the Socialist Left party's youth organization, as leader of its Bergen chapter in 1996–1998, and went on to be elected leader of the county (Hordaland) organization in 1998–2000. He was deputy leader of the Socialist Youth's national organization 2000–2002.
Lysbakken's first public office was as member of the Bergen City Council in 1999–2000. He was elected to the Parliament of Norway in 2001 as a representative for Hordaland county. He was a member of the parliament's Standing Committee on Finance and Economic Affairs. He failed to be re-elected in 2005, but became first deputy representative. He was elected deputy leader of the Socialist Left Party on 18 February 2006.
In 2009, he reclaimed a seat in Parliament from Hordaland, and was appointed to the Standing Committee on Foreign Affairs and Defence. He was named parliamentary leader of his party group, but was shortly thereafter appointed as Minister of Children, Equality and Social Inclusion in Stoltenberg's Second Cabinet on 20 October 2009, as the first man to hold this post. When Lysbakken was appointed to the ministry, his deputy Gina Barstad took his place in Parliament.
During Lysbakken's term in office, the parental leave and the father's quota were extended. Lysbakken also wrote a book entitled "Liberty, equality and fatherhood", which was published in 2011.
In January 2012, the newspaper Dagbladet reported that the Ministry of Children and Equality had awarded NOK 500,000 to two groups to fund self-defense education for high school girls. One of the organizations, receiving NOK 154,000, was Jenteforsvaret (lit: "Girl-defence"), a subgroup of Socialist Youth, his own party's youth organization. Although approved by parliament to combat a recent spike in sexual assaults, the allocation was made without public notice, in violation of internal government rules. As Lysbakken was on parental leave when the case broke, his State secretary, Henriette Westhrin, reported that the allocation was made according to "completely normal procedure". Lysbakken later apologized unreservedly, calling the affair an "error of judgment" on his behalf and promising a "full review" of the Ministry's past funding of external projects.
In the wake of the disclosure, Lysbakken's conflict of interest in the allocation of funds to the NGO Reform, where he had been a member of the board until assuming his ministerial post, also came to attention. The Christian Democrats also questioned an award of NOK 300,000 to distribute a sexual education book for children, authored by members of his party. The Norwegian parliament's Standing Committee on Scrutiny and Constitutional Affairs opened a public inquiry into the misuse of public funds under Lysbakken's leadership. As a result of the affair, he resigned as minister on 5 March 2012.
His conduct was labeled "political corruption" by anti-corruption watchdog Transparency International's Norwegian branch, a position that was echoed by scholar Petter Gottschalk, who pointed out that Lysbakken was in position to expect favours in return for the funds. When the case broke, Lysbakken was campaigning to be elected leader of the Socialist Left Party, and the recipients of the funds were among his supporters. Professor of Law, Jan Fridthjof Bernt, however, asserted that although the case was clearly one of poor practice, there were no signs of criminal action. The Authority for Investigation and Prosecution of Economic Crime or (Økokrim) in fact stated that the police did not have the jurisdiction over the matter, and for Lysbakken to be prosecuted, he would have had to be impeached by parliament. According to analysts, the impeachment of Lysbakken was unlikely at best due to his party being part of the majority coalition.
Not only Lysbakken, but also one of his State secretaries, Kirsti Bergstø, and the non-political permanent under-secretary of state, Harald Nybøen, resigned as a consequence of the case. Based on statements by Lysbakken, alleging that "this could have happened in many ministries", the Parliament initiated a wide-reaching inquiry into the ministries' allocations to external beneficiaries. During this inquiry's final hearing, Lysbakken was lauded by opposition leader of the Standing Committee on Scrutiny and Constitutional Affairs, Anders Anundsen, for taking his constitutional responsibility and resigning, and his successor Inga Marte Thorkildsen received praise for taking measures "which could make one of the worst ministries into one of the best" in its allocation practices. The inquiry exposed irregularities in the allocation practices of several ministries. At an earlier hearing, one member of the Standing Committee, Per-Kristian Foss, said in regards to the Ministry of Children and Equality that he believed that the malpractices were a "Lysbakken issue".
After resigning as a Minister on 5 March 2012, he resumed his duties as a representative in Stortinget and the position as parliamentary leader, now holding a seat on the Parliament's Standing Committee on Health and Social Services, as well as the Enlarged Standing Committee on Foreign and Defence Affairs. On 10 March, he was elected party leader.
As deputy leader of the Socialist Youth, Lysbakken described himself as a Marxist, and expressed wishes to "abolish capitalism" as well as the Oslo Stock Exchange. In a study booklet for the Socialist Youth that he co-authored, called Manifest 02, he called for a ban on the right to privately own means of production as well as wage labour. He argued for his views in a 2005 interview, and was defended by Prime Minister Stoltenberg when appointed minister in 2009. During his campaign to be elected party leader in 2011, he said that "Ten years ago, when I was elected as a representative to the Parliament, I called myself a revolutionary marxist. I no longer do. The world has changed, and the Socialist Left has changed." In 2009, he co-authored a book, arguing that the financial crisis demonstrated, among other things, a need for greater economic democracy.
"Capitalism is no fun, that's why I am against it" (On capitalism, 12.06.2004)
"Secrecy is a culture which we don't want, it is suppressing the morale, we need transparency" (In response to the lack of transparency in politics, 24.05.2004)
"I like to dress nice and have no desire to wear jeans and sneakers in parliament in order to protest against the establishment. The problem is that parliament's definition of nice clothes is very narrow." (In response to the dress code in the Norwegian parliament, 18.11.2001)