Tykwer was fascinated by film from an early age. He started making amateur Super 8 films at the age of eleven and later helped out at a local arthouse cinema to see more movies, including those he was too young to buy tickets for. After graduating from high school, he unsuccessfully applied to numerous film schools around Europe and moved to Berlin, where he worked as a projectionist. In 1987, at the age of 22, he became the programmer the Moviemento cinema and was known to German directors as a highly respected film buff.

In Berlin, Tykwer met and befriended the filmmaker Rosa von Praunheim, who urged him to create stories from his own experience and suggested that Tykwer record arguments with his girlfriend at the time and turn them into a short film. Because (1990) was screened at the Hof Film Festival and well-received by the audience, which inspired Tykwer to continue pursuing filmmaking. He made a second short film, Epilog (1992) that plunged him into personal financial debt, but gained him valuable technical filmmaking experience.

Tykwer wrote the screenplay to and directed his first feature film, Deadly Maria, which aired on German television and saw a limited theatrical release in Germany and the international film festival circuit.

In 1994, Tykwer founded the production company ‘X Filme Creative Pool’ with Stefan Arndt, Wolfgang Becker and Dani Levy. Tykwer and Becker wrote the screenplay for Life Is All You Get while working on Tykwer's second feature, Wintersleepers (1997), a much bigger and complex production than Deadly Maria. Wintersleepers brought Tykwer to the attention of German cineastes and film festivals, but Tykwer was struggling financially. He knew he needed a new film, and the result was Run Lola Run (1998), which became the most successful German film of 1998, scored $7 million at the US box office, and elevated Tykwer to international fame.

As Lola was becoming a success worldwide, Tykwer was already at work on his next film, The Princess and the Warrior. He had meanwhile started dating Franka Potente, the star of Run Lola Run. While Lola was making Tykwer famous, The Princess and the Warrior featured no big-name actors and was shot in Wuppertal, Tykwer's hometown. It centered on a love story between a nurse and a former soldier.

Miramax produced his next film, Heaven (2002), based on a screenplay by the late Polish filmmaker, Krysztof Kieslowski. It was shot in English, starred Cate Blanchett and Giovanni Ribisi, and filmed in Turin and Tuscany.

After Heaven, Tykwer felt creatively exhausted and personally adrift, having broken up with Franka Potente. He was approached by French producers to film a short contribution to Paris, je t'aime (2006), a film comprised of 20 short films by many famous directors depicting love in Paris. Tykwer shot the 10-minute short film, True, with Natalie Portman and Melchior Beslon. He shot the film quickly with almost no pre-production, and the result was a tiny masterpiece that Tykwer later said, "symbolises an entire life for me, in just ten minutes."

Tykwer's latest film is an adaptation of the novel Perfume by the German novelist Patrick Süskind.