Born in Belluno, he graduated from Bocconi University, Milan in 1966 and received a Master's degree from the Massachusetts Institute of Technology in 1970. After a first job in Germany with the retailer C&A Brenninkmeijer, he joined the Bank of Italy in 1968, eventually becoming Vice-Director General from 1984 to 1997. In 1980 he became a member of the influential Washington-based financial advisory body, the Group of Thirty and remains one to this day. From 1993 to 1997, he was also president of the Basel Committee on Banking Supervision. In 1997-1998 he was head of Consob, Italy's stock market supervision agency.

Padoa-Schioppa was a member of the European Central Bank's six-member executive board from its foundation in 1998 until the end of May 2005. In October 2005 he became president of Paris-based think tank Notre Europe.

On May 17, 2006 he was appointed as Economy and Finance Minister in the government of Romano Prodi, serving in that post until May 2008, when a new government headed by Silvio Berlusconi took office following the April 2008 general election.

From October 2007 to April 2008 he was Chairman of the IMFC (International Monetary and Financial Committee), the top policy steering committee of the International Monetary Fund (IMF).

He was married to the economist Fiorella Kostoris; they have three children. They are now divorced and he is the companion of the journalist Barbara Spinelli, daughter of Altiero Spinelli.

In 2006 TP-S coined the expression “il tesoretto” (the little treasure) to describe the increased government revenues under his administration. The term was widely used by politicians as they debated how this new money should be spent.

In October 2007 he spoke to a parliamentary committee about the government's plan for tax relief (approx. 500?/year) to people 20-30 years old still living with their family, saying it would help them move out on their own. He used the ironic or sarcastic term "bamboccioni" (big dummy boys, or big stuffed children) and this created a big fuss in Italian public opinion.. Newspapers received numerous letters from readers personally taking offense and pointing out that he understood little about the situation of a considerable part of the 20-30 years old Italian population, who live on approximately 1000? per month and cannot afford to leave their parents’ house . According to some lexicographers, "bamboccioni" was the most popular new Italian word of 2007.

Padoa-Schioppa was the first to describe the euro as "a currency without a State" (in a book published in 2004), a term that was later popularized by Otmar Issing .

Padoa-Schioppa has been called the “intellectual impetus” behind the euro and the “founding father” of the new currency . The reason for this is that in an economics paper written in 1982 he pointed out that it is impossible for a group of countries like the EU to simultaneously aim at:

• free trade,
• capital mobility,
• independent domestic monetary policies, and
• fixed exchange rates.

These four goals, each apparently desirable on its own, he called "the inconsistent quartet". At that time, European Union countries maintained some restrictions on trade and (especially) on capital movements. These were gradually eliminated through the Single Market programme and the liberalization of capital movements, so that by the late 1980's one of the two remaining objectives had to go to for consistency to be maintained. Padoa-Schioppa had proposed that the third objective (independent monetary policies) be abandoned, by creating a single currency and a single European central bank, so that the other three objectives could be attained. The Delors Report of April 1989 endorsed this view and recommended a European Monetary Union (EMU) with a single currency. Padoa-Schioppa then worked on designing and setting up the new European Central Bank and became one of the first executive board members.

• (Italian language)