Lloyd was born on August 2, 1960. He graduated from Phillips Academy in 1978 and received a bachelor of arts degree from Harvard College in 1982. He earned a certificate of advanced study in mathematics and a master of philosophy degree from Cambridge University in 1983 and 1984, while on a Marshall Scholarship. Lloyd was awarded a doctorate by Rockefeller University in 1988 (advisor Heinz Pagels) after submitting a thesis on Black Holes, Demons, and the Loss of Coherence: How Complex Systems Get Information, and What They Do With It. From 1988 to 1991, Lloyd was a postdoctoral fellow in the High Energy Physics Department at the California Institute of Technology, where he worked with Murray Gell-Mann on applications of information to quantum-mechanical systems. From 1991 to 1994, he was a postdoctoral fellow at Los Alamos National Laboratory, where he worked at the Center for Nonlinear Systems on quantum computation. In 1994, he joined the faculty of the Department of Mechanical Engineering at MIT. Since 1988, Lloyd has also been an adjunct faculty member at the Santa Fe Institute.

In his book, Programming the Universe, Lloyd contends that the universe itself is one big quantum computer producing what we see around us, and ourselves, as it runs a cosmic program. According to Lloyd, once we understand the laws of physics completely, we will be able to use small-scale quantum computing to understand the universe completely as well.

Lloyd states that we could have the whole universe simulated in a computer in 600 years provided that computational power increases according to Moore's Law. However, Lloyd shows that there are limits to rapid exponential growth in a finite universe, and that it is very unlikely that Moore's Law will be maintained indefinitely.

Lloyd is principal investigator at the MIT Research Laboratory of Electronics, and directs the Center for Extreme Quantum Information Theory (xQIT) at MIT.