Orphaned in infancy, Lady Liu was raised by maternal relatives, and by adolescence she became a singer skilled at hand-drums. She married Gong Mei (龔美), a silversmith who took her to the capital Kaifeng, where in 983, she entered the palace of prince Zhao Yuanxiu, one of the emperor's sons. According to anecdotes in historian Sima Guang's Sushui Jiwen, Gong Mei sold Lady Liu out of poverty, probably first to Zhang Qi (張耆), an official in the prince's palace.
The 15-year-old Zhao Yuanxiu was greatly enamored of the 14-year-old entertainer. Once, the emperor remarked that his son was getting "listless and thinner", and Zhao Yuanxiu's strict wet nurse, apparently hating Lady Liu's likely crude behaviors, promptly blamed her in front of the emperor. Lady Liu was forced to leave the palace, but the prince kept her at the house of Zhang Qi, who begrudgingly accepted her only after receiving 500 ounces of silver for the construction of a separate residence, so as to circumvent the emperor's order.
Zhao Yuanxiu, who later changed his name to Zhao Heng, became emperor after his father's death in 997. Returning to his side, Lady Liu was given the title of "Beautiful One" (美人) in 1004 and further promoted to "Cultivated Deportment" (修儀) in 1009. As Empress Guo had died in 1007, the emperor wanted to make Consort Liu empress, but gave in after strong ministerial opposition.
In 1010, one of Consort Liu's servants, Lady Li, gave birth to a son, borne by the emperor. Already in her 40s and childless, Lady Liu adopted the infant and cared for him like her own. In 1012 she became Virtuous Consort Liu (劉德妃), and several months later, she became the empress.
Liu was described as naturally alert and perceptive, with a good judgement and an ability to make quick decisions. She demonstrated these qualities in handling the palace affairs as empress, and she also learned enough to be able to understand and discuss the state affairs with the emperor. This made him trust her with political tasks during his illness.
In 1020, Emperor Zhenzong became affected by an illness which was to cause his death two years later and unable to handle the affairs of state. By this time, the empress were already established as power behind the throne and handled the affairs of state. She continued to act unofficially as regent of China for the two remaining years of his life.
In 1022, Emperor Zhenzong was succeeded by Emperor Renzong, who was twelve years old and thereby not of legal majority for another five years, as emperors were considered to be of legal majority at the age of seventeen. The Empress Dowager Liu now openly and officially assumed power as regent of China during his minority. She enjoyed all the Imperial prerogatives: she held court (with the child emperor by her side), she had her birthday celebrated with special names, she had envoys sent in her own name, and she even attended to the holy plowing ceremony and the imperial ancestral worship, all of which was normally only done by a ruling emperor. As a regent she became the second woman in Chinese history to wear the imperial robe, after Wu Zetian, the only empress regnant in Chinese history.
As a politician, Empress Liu has been described as a competent regent. Reportedly, she had the ability to appoint able officials and discharge unable ones; to listen, accept and sometime adhere to criticism despite being of a fierce temperament. She was however, criticized for having usurped the Imperial ceremonies and had herself worshiped as if she were an emperor, and because she appointed her relatives to high offices, because they were of a poor background and considered vulgar.
As the emperor were twelve years old at the time of his succession, and was legally due to be declared of legal majority at seventeen, she would normally had been expected to step down as regent after five years: however, she refused to do so, and continued to rule until her death. When she died, she left instructions that Consort Yang was to succeed her as the regent of the emperor, but the emperor refused to honor her will.
During her reign, Emperor Renzong had falsely believed that she was his biological mother, and did not find out otherwise until after her death, which caused him to react with rage.
According to official history, Lady Liu's grandfather Liu Yanqing was a general during the Later Jin and Later Han dynasties. The family later moved from Taiyuan in the north to Jiazhou in the southwest, where her father Liu Tong assumed office of prefectship, likely during the first years of the newly established Song dynasty which conquered the region in 965.