Abbott was born at Roxbury, Massachusetts, the son of the prolific author, educator and historian Jacob Abbott. Lyman Abbott grew up in Farmington, Maine and later in New York City.

He graduated from the New York University in 1853, where he was a member of the Eucleian Society, studied law, and was admitted to the bar in 1856; but soon abandoned the legal profession, and, after studying theology with his uncle, John Stevens Cabot Abbott, was ordained a minister of the Congregational Church in 1860. He was pastor of the Congregational Church in Terre Haute, Indiana, in 1860-1865, and of the New England Church in New York City in 1865-1869. From 1865 to 1868 he was secretary of the American Union Commission (later called the American Freedmen's Bureau). In 1869 he resigned his pastorate to devote himself to literature. He was an associate editor of Harper's Magazine, was editor of the Illustrated Christian Weekly for six years, and was co-editor (1876-1881) of the Christian Union with Henry Ward Beecher, whom he succeeded in 1888 as pastor of Plymouth Church, Brooklyn. From this pastorate he resigned ten years later. From 1881 he was editor-in-chief of The Christian Union, renamed The Outlook in 1893; this periodical reflected his efforts toward social reform, and, in theology, a liberality, humanitarian and nearly unitarian. The latter characteristics marked his published works also.

On Sunday, October 30, 1897, Abbott delivered an address in New York at the funeral of economist, Henry George, aptly titled, "Henry George: A Remembrance".

Abbott's opinions differed from those of Beecher. Abbott was a constant advocate of social reform, and was an advocate of Theodore Roosevelt's progressivism for almost 20 years. He would later adopt a pronouncedly liberal theology. He was also a pronounced Christian Evolutionist. In two of his books, The Evolution of Christianity and The Theology of an Evolutionist, Abbott applied the concept of evolution in a Christian theological perspective. Although he himself objected to being called an advocate of Darwinism, he was an optimistic advocate of evolution who thought that "what Jesus saw, humanity is becoming."

His son, Lawrence Fraser Abbott, accompanied President Roosevelt on a tour of Europe and Africa (1909-10). In 1913 Lyman Abbott was expelled from the American Peace Society because military preparedness was vigorously advocated in the Outlook, which he edited, and because he was a member of the Army and Navy League. During the War he was a strong supporter of the government's war policies.

Lyman Abbott died on October 22, 1922 and was buried in the New Windsor Cemetery in Cornwall-on-Hudson, New York.

Sermons of Henry Ward Beecher (2 vols., 1868)