Johar was born on 25 May 1972 in Mumbai, India to film producer Yash Johar, founder of Dharma Productions and Hiroo Johar. He has Punjabi Hindu ancestry from his father's side, and Sindhi Hindu ancestry from his mother's side. He studied at the Green Lawns High School. In his autobiography, An Unsuitable Boy, Johar recounts that he took the entrance test of the elite all-boys boarding school, The Doon School in Dehradun, but scored a zero in mathematics. This led the then headmaster Gulab Ramchandani to write a very "emotional letter" to Johar's mother, declining admission. After Green Lawns, he attended H.R. College of Commerce and Economics, both in Mumbai.

Johar started his career in the entertainment industry as an actor, when he played the role of Shrikant in the 1989 Doordarshan serial Indradhanush. As a child, he was influenced by commercial Indian cinema: He cites Raj Kapoor, Yash Chopra and Sooraj Barjatya as his inspirations. For a time, Johar followed numerology, creating film titles in which the first word and a number of others in the title began with the letter K. After watching the 2006 comedy-drama Lage Raho Munna Bhai which was critical of numerology, Johar decided to stop this practice.

Discussing his sexual orientation, Johar said "Everybody knows what my sexual orientation is. I don't need to scream it out. If I need to spell it out, I won't only because I live in a country where I could possibly be jailed for saying this". In February 2017, Johar became father to twins (a boy and a girl) through surrogacy. The twins were born at Masrani Hospital in Mumbai. Johar named his son Yash after his father, and his daughter Roohi named by rearranging his mother's name Hiroo.

In addition to working as an assistant director on Dilwale Dulhania Le Jayenge (1995), Johar was an actor in the film, playing the minor role of a friend of Shah Rukh Khan’s character. Since then, he has made cameo appearances playing himself in films like Om Shanti Om (2007), Fashion (2008), and Luck by Chance (2009).

He made his full-fledged acting debut alongside Ranbir Kapoor and Anushka Sharma in Anurag Kashyap’s period drama Bombay Velvet (2015), in which he played the main antagonist. Although the film did not perform well at the box-office, Johar earned some appreciation for his performance. Critic Sarita A. Tanwar commented, "The only consolation in the film is Karan Johar who brings a lot of dignity to the character of Khambatta... which is commendable since this is totally outside his comfort space."

Johar is the host of Koffee with Karan, a talk show where he interviews actors, directors, producers, and other prominent members of the Hindi film industry. The series has run intermittently since 2004, with seven seasons as of July 2022. Since 2012, he has served as a judge on the reality shows Jhalak Dikhhla Jaa (with Madhuri Dixit and Remo D’Souza), India's Got Talent (with Malaika Arora Khan, Kirron Kher, and Farah Khan) and India's Next Superstars (with Rohit Shetty). In January 2022, he appeared as a judge on the Colors TV's show Hunarbaaz: Desh Ki Shaan along with Mithun Chakraborty and Parineeti Chopra.

Johar is also an investor in an AI-led adtech influencer marketing platform Konfluence. The company had raised a pre-series funding of $4 million as of 8 February 2022.