Coster-Waldau was born in Rudkøbing, Denmark, the son of Hanne Søborg Coster, a librarian, and Jørgen Oscar Fritzer Waldau (died 1998). He has spoken in interviews about his father's problems with alcohol, as well as his parents' divorce. He has two older sisters, and was raised mainly by his mother. He grew up in Tybjerg, a small village between Ringsted and Næstved in southern Zealand. Coster-Waldau was the youngest actor to enter the Danish National School of Theatre and Contemporary Dance (Danish: Statens Teaterskole), where he was educated from 1989 to 1993.
Coster-Waldau made his stage debut as Laertes in Hamlet at the Betty Nansen Theater. His role in the film Nightwatch (1994) brought him fame in his native country. He then went on to play in Simon Staho’s Wildside (1998), which he also cowrote, and starred in Danish films such as Misery Harbour (1999). He made his British début alongside Clive Owen, Jude Law and Mick Jagger in Bent (1997).
In 2001, he began his U.S. career in Ridley Scott's Black Hawk Down as Medal of Honor recipient Gary Gordon. Coster-Waldau says "My first U.S. movie was Black Hawk Down and a friend helped me put myself on tape up on the attic over my apartment in Copenhagen. We shipped it out and I got lucky."
Coster-Waldau used his success to take roles on both sides of the Atlantic, particularly his native Scandinavia.
He next landed a lead role in Michael Apted's Enigma and also appeared as a villain in the action film My Name is Modesty (based upon the Modesty Blaise comic strip). Scott brought Coster-Waldau back for his 2005 film Kingdom of Heaven. Richard Loncraine, who cast the actor in Wimbledon in 2004, cast him in Firewall two years later, in 2006. In 2007, he played John Amsterdam, an immortal New York homicide detective who will become mortal after he finds his true love, in the short-lived Fox TV drama series New Amsterdam. As a result of filming that series' pilot, Coster-Waldau obtained his Screen Actors Guild card. He later recalled in a 2015 interview in TV Guide, "Finally getting my SAG card was huge for me...I got excited I went straight to the SAG online shop and bought four mugs with SAG logo. [I] still have those mugs!"
Since April 2011, Coster-Waldau has played Jaime Lannister on HBO's hit series Game of Thrones, based on George R. R. Martin's best-selling A Song of Ice and Fire fantasy novel series. He commented about the character "What's not to like about Jaime? As an actor I couldn't ask for a better role". For his role as Jaime Lannister he has received several awards nominations, including a Critics' Choice Television Award, a Saturn Award and People's Choice Awards nominations.
In 2011, he also starred alongside Sam Shepard in Mateo Gil’s feature Blackthorn, which premiered in Tribeca Film Festival. Later the same year he starred in Morten Tyldum’s Headhunters. The film went on to be highest-grossing Norwegian film of all-time and received very positive reviews including a BAFTA award nomination for best foreign film. Coster-Waldau starred in the 2013 horror film Mama alongside Jessica Chastain, which debuted at #1 of US box office and grossed over $140 million worldwide. He went on to play Sykes, a military weapons expert in the science fiction action thriller film Oblivion. The same year he co-starred with Juliette Binoche in Erik Poppe's drama A Thousand Times Good Night. In 2014, he starred in Susanne Bier's Danish thriller A Second Chance as Andreas, a police officer forced to make a difficult choice. In 2016, Coster-Waldau appeared in the action-fantasy film Gods of Egypt as Horus.
In early 2017, he starred in E.L. Katz's dark comedy Small Crimes which premiered at South by Southwest film festival on March 11, 2017, to positive reviews. Coster-Waldau then appeared in Danish 3 Things, a thriller about a prime suspect of a bank robbery who negotiates the terms of his witness protection deal. He starred in Roman Waugh's prison film Shot Caller, which premiered at the Los Angeles Film Festival on June 16, 2017.
In May 2017, it was announced that he is attached to star in Domino, a film directed by Brian De Palma, which marks the veteran director's return to filmmaking after half a decade out.
Coster-Waldau married Nukâka, a Greenlandic actress and singer, in 1998, and they live in Kongens Lyngby with their two children, daughters Filippa (born October 2000) and Safina (born November 2003), as well as two dogs.
Filippa has starred in a Danish short film, The Girl and the Dogs, which was shown at the Cannes Film Festival in 2014.
His father-in-law is Josef Motzfeldt, a member of the Parliament of Greenland and former leader of the Community of the People party.
He is a supporter of English football club Leeds United and he is a member of the Leeds United Supporter's Trust.
Coster-Waldau has been supporting the Danish Red Cross since 2003. In 2016, he announced a Game of Thrones campaign-contest in order to support the RED foundation which aims to raise awareness and fight AIDS.
Since September 2016 he has been appointed a UNDP Goodwill Ambassador to raise awareness and support the United Nations' Sustainable Development Goals, an action to end poverty, fight inequality and stop climate change. In 2017 Coster-Waldau partnered with Google, using Street View to document the impact of global warming in Greenland, in order to increase awareness and highlight climate change. After participating in a female empowerment initiative in Kenya, on the occasion of International Women's Day in 2017, he wrote a pledge calling for all fathers to support gender equality and women's empowerment, including those women who live in extreme poverty and are exposed to practises like child marriage. In September 2017 he was one of the speakers in the The Spotlight Initiative, a European Union-United Nations action to eliminate violence against women and girls, after kicking off the women’s amateur World Cup.