Nussbaum, though not a lawyer, is currently Ernst Freund Distinguished Service Professor of Law and Ethics at the University of Chicago, a chair that includes appointments in the Philosophy Department, the Law School, and the Divinity School. She also holds Associate appointments in Classics and Political Science, is a member of the Committee on Southern Asian Studies, and a Board Member of the Human Rights Program. She previously taught at Harvard and Brown where she held the rank of university professor.

Nussbaum was born in New York City, the daughter of George Craven, a Philadelphia lawyer, and Betty Warren, an interior designer and homemaker; during her teenage years, Nussbaum attended the Baldwin School in Bryn Mawr. She described her upbringing as "East Coast WASP elite...very sterile, very preoccupied with money and status." She would later credit her impatience with "mandarin philosophers" as the "repudiation of my own aristocratic upbringing. I don't like anything that sets itself up as an in-group or an elite, whether it is the Bloomsbury group or Derrida."

She studied theatre and classics at New York University, getting a Bachelor of Arts in 1969, and gradually moved to philosophy while at Harvard University, where she received an MA in 1972 and a PhD in 1975, studying under G. E. L. Owen. This period also saw her marriage to Alan Nussbaum (divorced in 1987), conversion to Judaism, and the birth of her daughter Rachel, who is currently a history professor at Evergreen State College. Her interest in Judaism has continued and deepened: on August 16, 2008 she became a bat mitzvah in a service at Temple K. A. M. Isaiah Israel in Chicago's Hyde Park, chanting from the Parasha Va-etchanan and the Haftarah Nahamu, and delivering a D'var Torah about the connection between genuine, non-narcissistic consolation and the pursuit of global justice.

During her graduate studies at Harvard, Nussbaum encountered "a tremendous amount of discrimination," including "sexual harassment," and "problems getting childcare" for her daughter. When she became the first woman to hold the Junior Fellowship at Harvard, Nussbaum received a congratulatory note from a "prestigious classicist" who suggested that since "female fellowess" was an awkward name, she should be called hetaira, the Greek word for an educated prostitute and companion.

She taught philosophy and classics at Harvard in the 1970s and early 1980s, where she was denied tenure by the Classics Department in 1982. Nussbaum then moved to Brown University, where she taught until the mid-1990s. Her 1986 book The Fragility of Goodness, on ancient Greek ethics, made her a well-known figure throughout the humanities. More recent work (Frontiers of Justice) establishes Nussbaum as a theorist of global justice.

Nussbaum's work on capabilities has often focused on the unequal freedoms and opportunities of women, and she has developed a distinctive type of feminism, drawing inspiration from the liberal tradition, but emphasizing that liberalism, at its best, entails radical rethinking of gender relations and relations within the family.

Nussbaum's other major area of philosophical work is the emotions. She has defended a "neo-Stoic" account of emotions that holds that they are appraisals that ascribe to things and persons outside the agent's own control great significance for the person's own flourishing. On this basis she has proposed analyses of grief, compassion, and love, and, in a later book, of disgust and shame.

Nussbaum has engaged in many spirited debates with other intellectuals, in her academic writings as well as in the pages of semi-popular magazines and book reviews and, in one instance, when testifying as an expert witness in court. Her testimony in the Colorado bench trial for Romer v. Evans, arguing against the claim that the history of philosophy provides the state with a "compelling interest" in favor of a law denying gays and lesbians the right to seek passage of local non-discrimination laws, has been called misleading and even perjurious by critics. She responded to these charges in a lengthy article, "Platonic Love and Colorado Law." The debate continued with a reply by one of her sternest critics, Robert P. George. Nussbaum has criticized Noam Chomsky as being among the "leftist intellectuals" who hold the belief that "one should not criticize one’s friends, that solidarity is more important than ethical correctness." She suggests that one can "trace this line to an old Marxist contempt for bourgeois ethics, but it is loathsome whatever its provenance." Among the people whose books she has reviewed critically are Allan Bloom, Harvey Mansfield, and Judith Butler. Her more serious and academic debates have been with figures such as John Rawls, Richard Posner, and Susan Moller Okin.

Nussbaum is a member of the American Academy of Arts and Sciences (elected 1988) and the American Philosophical Society. In 2008 she was elected a Corresponding Fellow of the British Academy. She is a Founding President and Past President of the Human Development and Capability Association and a Past President of the American Philosophical Association, Central Division. She has 33 honorary degrees from colleges and universities in North America, Europe, and Asia. In February 2009 she received the A.SK Social Science Award for contributions to "social system reform" from the Wissenschaftszentrum Berlin für Sozialforschung (WZB). In September 2005 Nussbaum was listed among the world's Top 100 intellectuals by Foreign Policy and Prospect magazines. She was similarly listed by Foreign Policy in 2008. In spring 2009, she won the American Philosophical Society's Henry M. Phillips Prize in Jurisprudence.

The Fragility of Goodness confronts the ethical dilemma that individuals strongly committed to justice are nevertheless vulnerable to external factors that may deeply compromise or even negate their human flourishing. Discussing literary as well as philosophical texts, Nussbaum seeks to determine the extent to which reason may enable self-sufficiency. She eventually rejects the Platonic notion that human goodness can fully protect against peril, siding with the tragic playwrights and Aristotle in treating the acknowledgment of vulnerability as a key to realizing the human good.