Born to Alfredo Lugano and Diana Morena in Canelones, Canelones Department, Lugano started playing football for his hometown club Club Atlético Libertad, like his father Alfredo. In December 1998, he played his first match with the first-team squad of Libertad, becoming league champions with the club at the age of 18 years. From Libertad, in 1999, Lugano transferred to Club Nacional de Football in Montevideo. Three years later, Lugano was loaned out to Plaza Colonia for the duration of the playing season.

Lugano came to São Paulo FC in 2003. He was contracted by club President Marcelo Portugal Gouveia without consulting the head coach Oswaldo de Oliveira. President Gouveia’s actions led to the ascribing of the nickname “Homem do Presidente” (“President’s Man”) to Lugano. After Oswaldo de Oliveira left the club in late 2003, Lugano started playing matches more frequently. In 2005, he led the team to titles in the Campeonato Paulista, the Copa Libertadores, and the FIFA Club World Championship in Japan. That same year, Lugano was recognized as South America’s best defender. His leadership skills and his willingness to fight for ball possession have raised his profile amongst São Paulo’s supporters, where he is still highly regarded. Lugano has also mentioned that he still maintains a good relationship with the club. In 2006, he helped his club to the runner-up stage of the Copa Libertadores.

Lugano joined Fenerbahçe on 21 August 2006 for a reported transfer fee of €7.5 million, where he signed a 3 ⁄2-year contract with the Turkish club. He and Edu Dracena’s powerful defensive abilities helped Fenerbahçe win the league during the club’s 100th anniversary year.

Lugano has made 95 appearances for the Uruguay national football team since making his debut in the 2006 FIFA World Cup qualification match against Paraguay. He has represented the country at two FIFA World Cups, two Copa América tournaments and one FIFA Confederations Cup. He captained the team for eight years, beginning in May 2006, when he was given the armband of La Celeste for the first time prior to a 2–1 friendly defeat to England at Old Trafford.

Lugano is notorious for his presence in attack, as was shown with his scored goals from headers from dead ball situations and support of the forward line. He became a fan favourite with his defensive tenacity and his spectacular play from free kick situations. Following a red card, he was suspended for five weeks after the derby match against Galatasaray during the 2008–09 season when he clashed with Emre Aşık on 12 April 2009 at Ali Sami Yen Stadium. Since then, he has a strong connection with supporters, especially with the Genç Fenerbahçeliler. He was one of the captains of the team. He signed a new four-year contract in 2009 with Fenerbahçe.

During the 2010 FIFA World Cup qualification campaign, Lugano scored his first international goal in a 1–1 draw with Venezuela at Montevideo’s Estadio Centenario. He went on to score three further goals during qualification, including the only goal of a 1–0 win in San José against Costa Rica in the inter-continental play-off.

At the 2010 FIFA World Cup, Lugano led Uruguay to an impressive fourth-placed finish. Lugano also captained Uruguay to victory at the 2011 Copa América, playing in all six games for the eventual champions. On 2 September 2011, Lugano scored a goal as Uruguay defeated Ukraine 3–2 in an international friendly away in Kharkiv. In his next call up to the national side, on 7 October 2011, Lugano netted a brace in Uruguay’s 4–2 defeat of Bolivia in World Cup qualifying.

On 27 August 2011, Fenerbahçe announced Lugano was leaving the club to join Paris Saint-Germain in the French Ligue 1 for a fee worth €3 million. His first season in France, however, ended poorly and Lugano made just 12 appearances, mostly being cut out of the side due to injury and poor form.

On 21 January 2013, Lugano signed with Spanish side Málaga CF until 30 June on loan. As he was not in PSG manager Carlo Ancelotti’s plans, Lugano was not inscribed in the Champions League for that season; this way, he was not cup tied for his new club and represented Málaga in their European ambitions. He returned to PSG on 1 July 2013, with Málaga failing to make the loan move permanent.

On 2 August 2013, Lugano joined Premier League club West Bromwich Albion on a two-year contract. He scored his first goal for West Brom on 20 January 2014, heading in an equalizer in a 1–1 home draw with Everton.

On 20 June 2013, Lugano scored his ninth goal for Uruguay against Nigeria in a 2–1 win at the 2013 FIFA Confederations Cup in Brazil, where the nation eventually finished in fourth place. He also participated in the 2014 FIFA World Cup, playing in his first and only game of the tournament as the captain against Costa Rica on 14 June 2014, where Uruguay lost 1–3. A knee injury saw Lugano miss the remainder of Uruguay’s World Cup matches, with 19-year-old José Giménez replacing him as Diego Godín’s partner in defence.

On 17 May 2014, West Bromwich announced the release of five players of their squad, including Lugano.

Lugano was omitted from Óscar Tabárez’s first post-World Cup squad for friendly matches against Japan and South Korea in September 2014. Later, the 34-year-old stated that he had not retired from the national team and would be available for selection if required. However, he was not named in Uruguay’s squad for the 2015 Copa América.

On 26 March 2015, Lugano signed for Swedish side BK Häcken on a short-term contract until the summer. Lugano became one of the most merited player to ever play in the Swedish top league.

In January 2016, after almost 10 years, Lugano returned to São Paulo FC, in Brazil, where he won 2005 Copa Libertadores and 2005 FIFA Club World Championship, he instantly became São Paulo’s idol. On 12 January 2016, he was welcomed at the Guarulhos Airport by nearly 1000 fans of Tricolor paulista.

In January 2018, Lugano accepted the role of director of institutional relations at São Paulo, confirming his retirement as a player.