Lippmann was born in Atlanta, Georgia, and raised in Baltimore, Maryland. She is the daughter of Theo Lippman Jr., a well known and respected writer at the Baltimore Sun, and Madeline Lippman, a retired school librarian for the Baltimore City Public School System. She attended high school in Columbia, Maryland, where she was the captain of the Wilde Lake High School It's Academic team.

Lippman is a former reporter for the (now defunct) San Antonio Light and the Baltimore Sun. She is best known for writing a series of novels set in Baltimore and featuring Tess Monaghan, a reporter (like Lippman herself) turned private investigator. Lippman's works have won the Agatha, Anthony, Edgar, Nero, Gumshoe and Shamus awards. Her 2007 release, What the Dead Know, was the first of her books to make the New York Times bestseller list, and was shortlisted for the Crime Writer's Association Dagger Award. In addition to the Tess Monaghan novels, Lippman wrote 2003's Every Secret Thing, which has been optioned for the movies by Academy Award—winning actor Frances McDormand.

Lippman lives in the South Baltimore neighborhood of Federal Hill and frequently writes in the neighborhood coffee shop Spoons. In addition to writing, she teaches at Goucher College in Towson, Maryland, just outside of Baltimore. In January, 2007, she taught at the 3rd Annual Writers in Paradise at Eckerd College.

Lippman is married to David Simon, another former Baltimore Sun reporter, and creator and an executive producer of the HBO series The Wire. The character Bunk is shown to be reading one of her books in episode eight of the first season of The Wire. She appeared in a scene of the first episode of the last season of The Wire as a reporter working in the Baltimore Sun newsroom.