Born Lillian Marie Bounds in Spalding, Idaho, she grew up in Lapwai, Idaho, on the Nez Perce Indian Reservation where her father worked as a blacksmith and federal marshal. She was working at the Disney Studio in "ink and paint" as a secretary when she met Walt.
Lillian and Walt Disney married on July 13, 1925 in (Idaho) at Lewiston's Episcopal Church of the Nativity. However, Walt's parents could not attend. As Lillian's own father was deceased, her uncle, who was chief of the Lewiston Fire Department, gave the bride away. She wore a dress which she had made herself. She and Walt had two daughters, Diane (died 2013) and Sharon (died 1993), the latter of whom was adopted. Lillian had ten grandchildren: seven by daughter Diane and her husband (Ron W. Miller), and three by daughter Sharon and her two husbands, Robert Brown and William Lund.
Her film career includes work as an ink artist on the film Plane Crazy. Lillian is credited with having named her husband's most famous character, Mickey Mouse, during a train trip from New York to California in 1928. Walt showed a drawing of the cartoon mouse to his wife and told her that he was going to name it "Mortimer Mouse." Lillian replied that the name sounded "too depressing" and she was very proud to have suggested the name "Mickey Mouse" instead of Mortimer.
Walt named one of the Disneyland Railroad cars the "Lilly Belle" in her honor, and the Walt Disney World Railroad has a locomotive named "Lilly Belle", where each locomotive is named for someone who greatly contributed to the Walt Disney Company. Walt Disney Imagineering created "The Empress Lilly", a paddle steamer replica, at Walt Disney World in Disney Springs and Lillian christened it on May 1, 1977. Lillian was inducted into the Disney Legends in 2003.
Following Walt Disney's death in 1966, Lillian Disney was married to John L. Truyens from May 1969 until his death in February 1981. In 1987, she pledged a $50 million gift towards the construction of a new concert hall in Los Angeles.
She helped fund the founding of The California Institute of The Arts.
After several delays, the Walt Disney Concert Hall opened in 2003, six years after her death. In the 1990s, reflecting on her 41-year marriage to Walt Disney, she said, "We shared a wonderful, exciting life, and we loved every minute of it. He was a wonderful husband to me, and wonderful and joyful father and grandfather."
Lillian Disney suffered a stroke on December 15, 1997, exactly 31 years after the death of her first husband, Walt. She died the following morning at her home, aged 98, two months before her 99th birthday, and is buried with her first husband, Walt Disney.