Christensen was born in Salt Lake City, Utah, the second of eight children. He holds a B.A. with highest honors in economics from Brigham Young University (1975), an M.Phil. in applied econometrics and the economics of less-developed countries from Oxford University (1977, Rhodes Scholar), an MBA with High Distinction from the Harvard Business School (1979, George F. Baker Scholar), and a DBA from the Harvard Business School (1992).

Before joining the faculty of Harvard Business School (HBS) in 1992, Christensen worked for the Boston Consulting Group and then served as chairman and president of Ceramics Process Systems Corporation (Now CPS Holdings), a firm he co-founded with several MIT professors in 1984. In 2000, he founded Innosight LLC, a consulting and training firm which describes itself as "focusing on idea generation, strategy development, commercialization, and innovative process development." In 2005, together with his colleagues at Innosight he launched Innosight Ventures, a venture firm focused on investing in India. In 2007, after incubating the processes for six years, Christensen co-founded Rose Park Advisors LLC (named after the neighborhood of Salt Lake City where he was raised), an investment company which applies his research as an investment strategy.

He serves on the board of directors of Tata Consultancy Services (NYSE: TCS), Franklin Covey (NYSE: FC), and Vanu, Inc.

He also served as a missionary for The Church of Jesus Christ of Latter-day Saints in the Republic of Korea (1971—1973).

He worked as a consultant and project leader with the Boston Consulting Group (BCG) (1979—1984); instrumental in founding the firm's manufacturing strategy consulting practice. He took a leave of absence from BCG to serve as a White House Fellow (1982—1983) as assistant to U.S. Transportation Secretaries Drew Lewis and Elizabeth Dole.

Clay Christensen lives in Belmont, Massachusetts with his five children and wife Christine. Matthew attended Duke and played on their 2001 championship basketball team and is an HBS grad. He and his wife, Elizabeth, have three children. Ann, also a Duke and HBS graduate, is a business consultant at a private equity firm. Michael attended Harvard College and is currently attending HBS. Spencer just returned from serving a Mormon mission in Taiwan and is a college sophomore. Catherine, the youngest, is currently a freshman at Barnard College and is a part of the Columbia Women's Rowing Team.

Christensen is a member of The Church of Jesus Christ of Latter-day Saints and has served in several leadership positions in the Church. He has been an Area Authority Seventy since April 2002. Prior to that he served as a counselor in the Massachusetts Boston Mission Presidency. He has also served as a bishop. He speaks fluent Korean.

Christensen is currently battling follicular lymphoma.