Lau was born in Suzhou, China, in 1965. She moved to Hong Kong at the age of fifteen, and joined TVB's acting classes.
She has been in a relationship with Tony Leung Chiu-wai since 1989. The couple married on 21 July 2008 at the Uma Paro resort in Bhutan. The wedding itself cost more than HK$30 million and Lau's 12-carat (2.4 g) Cartier wedding ring is worth over HK$10 million. Guests included singer Faye Wong who performed for them on their special day. Hong Kong director Wong Kar-wai also directed the ceremony. The wedding created a media frenzy in Hong Kong, with companies spending hundreds of thousands of dollars to pursue the wedding party.
Lau made her on-screen debut in The Duke of Mount Deer (1984). She skyrocketed to fame following her role as a wealthy heiress in one of Hong Kong's most-watched ever series, Looking Back in Anger (1989).
Lau then expanded to films. She was nominated at the Hong Kong Film Award for Best Actress for her role in Her Beautiful Life Lies (1989). She received acclaim for her role in Days of Being Wild (1991), one of her many collaborations with film director Wong Kar-wai. Despite being embroiled in tabloid scandals, Lau's impressive turn as vivacious cabaret dancer in the film put the focus back onto her talent. She continued to showcase her versatility with impressive performances in martial arts epic Saviour of the Soul (1991), biopic Center Stage (1992), cross-dressing comedy He's a Woman, She's a Man (1994) and offbeat romance Gigolo and Whore (1994). Following parts in the wuxia classic Ashes of Time (1994) and James Bond pastiche Forbidden City Cop (1997), Lau once again attracted the attention of various awards juries with her measured portrayals of bisexual silk factory owner Wan in Intimates (1997) and a prostitute in 19th Century epic Flowers of Shanghai (1998).
Her roles as Hon Sam's wife in the two Infernal Affairs sequels and an android in Wong Kar-wai's 2046 (2004) further increased Lau's international recognition. Lau then stepped in the shoes of Sarah Jessica Parker for the Hong Kong version of Sex and the City, named Sex and the Beauties (2004). She won rave reviews for her performances as unhappily-married Rose in the low-budget thriller Curiosity Kills the Cat (2006) and as Wu Zetian in the blockbuster Detective Dee and the Mystery of the Phantom Flame (2010). She received a Best Actress nomination at the Cannes Film Festival for her role as a rich housewife abandoned by her husband in Bends (2013).
She was executive president of Hong Kong's TVMART channel, but was replaced by the board after a loss of 40 million Taiwan Dollars. She told the media that because she had no education, the decisions made by her had some negative influences on the company.
In 1990, during the filming of Days of Being Wild, Lau was abducted for several hours, and topless photos of her were taken. At the time, local papers, through Reuters news agency, reported that Lau was kidnapped, though a police report was not filed. It was believed that the man behind the kidnapping is Albert Yeung, a successful businessman with whom Lau was having a financial dispute. Leung has said that Lau never wanted to talk about what happened in those missing hours with anyone, including him.
Lau revealed in 2008 that she was abducted by four men working for a triad boss, as "punishment" for having refused a film offer. She said that she had not been taken advantage of during her two-hour ordeal.
Naked pictures of Carina Lau were published in the 30 October 2002 edition of East Week (magazine), years after Lau was kidnapped by triads who punished her for refusing to take part in a film they were funding.
The nude photos revealed the actress in distress. Massive protests and petitions were held by fellow Hong Kong entertainers, and media ethics by Hong Kong tabloids and gossip magazines were questioned. The magazine was shut down in November 2002, only to be resumed in late 2003. Mong, the publisher of the photo who is 52 years old as of 2009, received a 5-month jail sentence after pleading guilty in December 2008 to publishing obscene photos. Mong now lives in Beijing.