Tyson was born Laura D'Andrea in New Jersey. Her father was Italian American and her mother was of Swedish and Dutch descent. Tyson graduated summa cum laude with a B.A. in Economics from Smith College in 1969 and earned her Ph.D. in Economics from the Massachusetts Institute of Technology in 1974. She joined the faculty of the economics department at Princeton University in 1974 and remained in the position until 1977 when she became a professor of economics at the University of California, Berkeley. She was appointed a professor of business administration in 1990. She is married to writer Erik S. Tarloff and has one son, Elliot S. Tarloff. Her brother is Alan D'Andrea, an American cancer researcher and the Alvan T. and Viola D. Fuller American Cancer Society Professor of Radiation Oncology at Harvard Medical School. Her sister is Susan D'Andrea Lee, retired supervising examiner for the Federal Reserve Bank of New York currently a policy advisor at the Office of Financial Research, US Department of the Treasury, Washington DC.
From 2002 to 2006, Tyson was the first female Dean of London Business School. From 1998 to 2001, she was Dean of the Haas School of Business. She served in theClinton Administration as Chairman of the President's Council of Economic Advisers from 1993 to 1995. She was a spokesperson in favour of GATT, arguing with Sir James Goldsmith on Charlie Rose that American jobs will be increased by the trade agreement. Tyson was Director of the National Economic Council from 1995 to 1996. Tyson has been a member of the Council on Foreign Relations since 1987, a board director of Morgan Stanley since 1997, a board director of AT&T Inc. since 1999, a board director of Eastman Kodak and is a member of the Committee on Capital Markets Regulation. In December, 2009 it was announced that Tyson will join CB Richard Ellis Board of Directors on March 4, 2010. Tyson also sits on the QFINANCE Strategic Advisory Board.