James Lipton was born Louis James Lipton in Detroit, Michigan, to Betty (Weinberg), a teacher and librarian, and Lawrence (Israel) Lipton, a writer and beatnik poet. His father was a Polish Jewish immigrant from Lodz and his maternal grandparents were Russian Jews. Lipton's parents divorced when he was quite young. As a reaction against his beatnik father's anarchic and chaotic lifestyle, Lipton at first chose to pursue a career as a lawyer. He originally took up acting as a sideline to finance his law studies but eventually he shifted the focus of his career to acting.
Lipton moved to New York City and undertook twelve years of intensive studies in the performing arts. He studied acting and directing under Stella Adler. Lipton also studied with Harold Clurman and Robert Lewis. He studied movie/TV production and directing at New York University and at The New School. He also studied voice, modern dance, classical ballet, and jazz technique.
Lipton performed on Broadway. He became active in several TV soap operas, where he acted and wrote scripts. Lipton wrote the book and the lyrics for the Broadway hit "Nowhere to Go But Up", and for "Sherry!". He produced "The Mighty Gents" and "Monteith & Rand" and co-produced the Tony award-winning "Ain't Misbehavin'". He choreographed "Charlot" for ballet theater, and he translated from the original French, adapted it as a musical version, wrote the lyrics, directed and choreographed Moliere's play "The Doctor In Spite of Himself".
Lipton is best known for creating and hosting the noted and popular TV series Inside the Actors Studio, where successful and prominent actors discuss their craft for the benefit of acting students. The show made him so famous that he was frequently parodied on Saturday Night Live by comic Will Ferrell.