The generic holotype, consisting of broken teeth, jaws, and a skull was discovered by a pastoralist, William Avery, near Lake Colungolac from which the species Thylacoleo carnifex was described by Richard Owen.

Three species are known: Fossils of other representatives of Thylacoleonidae, such as Microleo and Wakaleo, date back to the Late Oligocene Epoch, some 24 million years ago.

The holotype is a third premolar, discovered at a cave in Curramulka in South Australia, exhibiting the carnivorous characteristics of the genus and around half the size of T. carnifex.

Though a few authors continued to hint at phalangeroid affinities for thylacoleonids as recently as the 1990s, cranial and other characters have generally led to their inclusion within vombatiformes, and as stem-members of the wombat lineage.

[12] Marsupial lions and other ecologically and morphologically diverse vombatiforms were once represented by over 60 species of carnivorous, herbivorous, terrestrial and arboreal forms ranging in size from 3 kg to 2.5 tonnes.

It seems improbable that Thylacoleo could achieve as high a bite force as a modern-day lion; however, this might have been possible when taking into consideration the size of its brain and skull.

Carnivores usually have rather large brains when compared to herbivorous marsupials, which lessens the amount of bone that can be devoted to enhancing bite force.

[25] Using 3D modeling based on X-ray computed tomography scans, marsupial lions were found to be unable to use the prolonged, suffocating bite typical of living big cats.

They instead had an extremely efficient and unique bite; the incisors would have been used to stab at and pierce the flesh of their prey while the more specialised carnassials crushed the windpipe, severed the spinal cord, and lacerated the major blood vessels such as the carotid artery and jugular vein.

[25] The hind feet had four functional toes, the first digit being much reduced in size, but possessing a roughened pad similar to that of possums, which may have assisted with climbing.

The discovery in 2005 of a specimen which included complete hind feet provided evidence that the marsupial lion exhibited syndactyly (fused second and third toes) like other diprotodonts.

[28] Its strong forelimbs and retracting claws mean that Thylacoleo possibly climbed trees and perhaps carried carcasses to keep the kill for itself (similar to the leopard today).

[31] In 1911, a study by Spencer and Walcott claimed that certain marks on the bones of megafauna had been made by Thylacoleo, but according to Horton (1979) they were not sufficiently rigorous, resulting in their arguments being strongly challenged by later scholars, such as Anderson (1929), and later Gill (1951, 1952, 1954), thereby leaving the issue unresolved.

[32] Besides the most common hypothesis that it was an active predator, a variety of other theories existed in the late 19th to early 20th centuries as to the diet and feeding of Thylacoleo, with hypotheses of it being a scavenger filling the ecological niche of hyenas,[33] being a specialist of crocodile eggs,[29] or even a melon-eater.

[30] Incisions on bones of the extinct large kangaroo Macropus titan, and the general morphology of Thylacoleo suggests that it fed in a similar manner to modern cheetahs, by using their sharp teeth to slice open the ribcage of their prey, thereby accessing the internal organs.

It also may have shared behaviours exhibited by recent diprotodont marsupials such as kangaroos, like digging shallow holes under trees to reduce body temperature during the day.

[36] Analysis of finds on the Nullabor Plain suggests that Thylacoleo carnifex inhabited open, arid environments similar to those found across much of Australia today.