Luce was born in Tengchow (now Penglai), Shandong, China, on April 3, 1898, the son of Elizabeth Root Luce and Henry Winters Luce, who was a Presbyterian missionary. He received his education in various Chinese and English boarding schools, including the China Inland Mission Chefoo School.
At 15, he was sent to the US to attend the Hotchkiss School in Connecticut, where he edited the Hotchkiss Literary Monthly. It was there he first met Briton Hadden, who would become a lifelong partner. At the time, Hadden served as editor-in-chief of the school newspaper, and Luce worked as an assistant managing editor. Both went on to Yale College, where Hadden served as chairman and Luce as managing editor of The Yale Daily News. Luce was also a member of Alpha Delta Phi and Skull and Bones. After being voted "most brilliant" of his class and graduating in 1920, he parted ways with Hadden to embark for a year on historical studies at Oxford University, followed by a stint as a cub reporter for the Chicago Daily News.
In December 1921, Luce rejoined Hadden to work at The Baltimore News. Recalling his relationship with Hadden, Luce later said, "Somehow, despite the greatest differences in temperaments and even in interests, we had to work together. We were an organization. At the center of our lives — our job, our function — at that point everything we had belonged to each other."
Nightly discussions of the concept of a news magazine led Luce and Hadden, both age 23, to quit their jobs in 1922. Later that same year, they partnered with Robert Livingston Johnson and another Yale classmate to form Time Inc. Having raised $86,000 of a $100,000 goal, they published the first issue of Time on March 3, 1923. Luce served as business manager while Hadden was editor-in-chief. Luce and Hadden annually alternated year-to-year the titles of president and secretary-treasurer while Johnson served as vice president and advertising director. In 1925, Luce decided to move headquarters to Cleveland, while Hadden was on a trip to Europe. Cleveland was cheaper, and Luce’s first wife, Lila, wanted out of New York. When Hadden returned, he was horrified and moved Time back to New York. Upon Hadden's sudden death in 1929, Luce assumed Hadden's position.
Luce launched the business magazine Fortune in February 1930 and acquired Life in order to relaunch it as a weekly magazine of photojournalism in November 1936; he went on to launch House & Home in 1952 and Sports Illustrated in 1954. He also produced The March of Time weekly newsreel. By the mid 1960s, Time Inc. was the largest and most prestigious magazine publisher in the world. (Dwight Macdonald, a Fortune staffer during the 1930s, referred to him as "Il Luce", a play on the Italian Dictator Mussolini, who was called "Il Duce".)