In 1997, when Liu was 10 years old, she and her mother immigrated to the United States. She lived in Queens, New York City where she attended Louis Pasteur Middle School 67. In 2002, she returned to China to pursue an acting career and changed her name to “Liu Yifei” (刘亦菲). Several weeks after returning to China, Liu was accepted into the Performance Institute of Beijing Film Academy at age 15 and graduated in 2006.

In 2005, Liu starred in Chinese Paladin, a fantasy action drama adapted from the role-playing game The Legend of Sword and Fairy. The drama earned a cult following, and solidified her popularity in China.

Liu signed with Sony Music Entertainment Japan in 2005. She released her first Japanese single “Mayonaka no Door” with Sony Music on July 19, 2006. Her debut album Liu Yifei was released the next month in various parts of Asia such as mainland China, Hong Kong and throughout Southeast Asia, featuring a diverse music repertoire including rap and soft rock. In the same year, Liu also released her Japanese album in which the single, “Mayonaka no Doa” was chosen to be an ending theme for the anime series Demashita! Powerpuff Girls Z by TV Tokyo.

In 2006, Liu was chosen to portray Xiaolongnü in The Return of the Condor Heroes, based on Louis Cha’s wuxia novel of the same title. Liu’s casting was backed by Cha himself, who felt that she had all the necessary qualities to portray the young and innocent female protagonist. After the drama aired, Liu gained acclaim for her performance and swiftly experienced a surge in popularity. The same year, she was chosen as the “Golden Eagle Goddess” at the 6th China Golden Eagle TV Art Festival.

After achieving success in television, Liu then ventured onto the big screen. In 2007, she joined William Morris Agency (WMA) and was subsequently cast in her first Hollywood production, The Forbidden Kingdom. She played Golden Sparrow, an orphan seeking revenge against her parents’ killer. Thereafter, she starred in romantic-comedy Love in Disguise (2010) opposite Taiwanese singer-actor Wang Leehom.

In 2011, she starred in fantasy supernatural film A Chinese Ghost Story, adapted from Strange Stories from a Chinese Studio; The same year, she was cast as Wu Qing (Emotionless) in Gordon Chan’s wuxia film The Four, adapted from Woon Swee Oan’s novel series The Four Great Constables. She subsequently reprised her role in two other installments of the film series.

In 2014, Liu collaborated with Korean actor-singer Rain for the romance film For Love or Money, based on Hong Kong novelist Amy Cheung’s 2006 novel of the same name. Though it did reasonably well at the box office, the film was criticized for its storyline and production. She then starred in the American-Chinese action film Outcast (2014) directed by Nick Powell, alongside Nicolas Cage and Hayden Christensen.

Liu started dating Song Seung-heon in 2015. They met in 2013 while filming The Third Way of Love. In January 2018, Song’s agency confirmed breakup reports by stating that both of them had been very busy and they naturally grew apart.

In 2016, Liu starred in romance film Night Peacock, a Chinese-France co-production directed by Dai Sijie. She then starred as Su Yunjin alongside Kris Wu in the youth romance film So Young 2: Never Gone.

In 2017, Liu starred alongside Yang Yang in romantic fantasy film Once Upon a Time by award-winning director Anthony LaMolinara and Zhao Xiaoding. She also starred in the historical film The Chinese Widow directed by Bille August. The film premiered at the Shanghai International Film Festival as the opening film, and Liu was nominated as Best Actress. The same year, Liu reunited with White Vengeance co-star Feng Shaofeng in the fantasy comedy film Hanson and the Beast.

In November 2017, Liu was cast as Mulan in the 2020 live-action adaptation of the 1998 Disney animated film.

In December 2017, it was announced that Liu will star in the upcoming fantasy mystery television series, The Love of Hypnosis. This marks her first small-screen comeback in 12 years.

In August 2019, Liu reshared an image posted by Chinese newspaper People’s Daily, an official newspaper of the Central Committee of the Chinese Communist Party. The image included a quote from Chinese reporter Fu Guohao who worked for People’s Daily-owned tabloid Global Times and was subsequently assaulted by protesters during the 2019–20 Hong Kong protests: “I support Hong Kong police. You can beat me now. What a shame for Hong Kong.” This sparked international controversy, with Liu being accused of supporting police brutality. Following this, the hashtag #BoycottMulan started trending supporting a boycott of the movie. In response to the controversy, Liu was not present at the 2019 D23 Expo, which gave fans an exclusive sneak peek of Mulan. When asked about the controversy in February 2020, Liu stated: “I think it’s just a very sensitive situation.”

During the interview with Variety magazine at the premiere of Mulan on March 10, 2020, Liu described herself as “Asian” instead of “Chinese”, which caused anger among some Chinese social media netizens, who threatened to boycott the movie and accused her of forgetting her roots, as well as questioning why a non-Chinese national was playing the “legendary Chinese icon”.