He was born into a Baidya Brahmin family in Dhaka, and raised mainly in Varanasi, India, and is the son of the noted economist Amiya Kumar Dasgupta.

They have three children, Zubeida (who is an educational psychologist), Shamik (a professor of philosophy), and Aisha (who is a demographer and works on the practice of family planning and reproductive health).

His work has been mainly applied-theoretical, but often highly mathematical, and many of his publications have been collaborative, among his co-authors being Kenneth Arrow, Scott Barrett, Ken Binmore, Aisha Dasgupta, Paul David, Paul Ehrlich, Lawrence Goulder, Sanjeev Goyal, Peter Hammond, Geoffrey Heal, Simon Levin, Stephen Marglin, Eric Maskin, Peter Raven, Debraj Ray, Amartya Sen, and Joseph Stiglitz.

Dasgupta had a long-standing collaboration with the late Karl-Goran Maler, with whom he developed the concept of 'inclusive wealth' as a measure of human well-being and helped to establish (with a grant from the McArthur Foundation, channelled through the Beijer Institute of Ecological Economics, Stockholm) the South Asian Network for Development and Environmental Economics (SANDEE), based in Kathmandu, which since 1999 has conducted annual teaching and research workshops on ecological economics for young economists based in Bangladesh, Bhutan, India, Nepal, Pakistan, and Sri Lanka.

During 1991–97 Dasgupta was Chairman of the (Scientific Advisory) Board of the Beijer International Institute of Ecological Economics of the Royal Swedish Academy of Sciences, Stockholm.

During 1999–2009 he served as a Founder Member of the Management and Advisory Committee of the South Asian Network for Development and Environmental Economics (SANDEE),[1] based in Kathmandu.

During 2011-2014 he was Chairman of the Scientific Advisory Board of the International Human Dimensions Programme (IHDP) on Global Environmental Change, Bonn.

[9] He was appointed Knight Grand Cross of the Order of the British Empire (GBE) in the 2023 New Year Honours for services to economics and the natural environment.

Dasgupta was co-recipient (with Karl-Göran Mäler) of the 2002 Volvo Environment Prize;[11] and (also with Mäler) of the 2004 Boulding Award of the International Society for Ecological Economics;,[12] co-recipient (with Geoffrey Heal) of the Association of Environmental and Resource Economists' "Publication of Enduring Quality Award 2003" for their book, Economic Theory and Exhaustible Resources; recipient of the PEN/John Kenneth Galbraith Award, 2007, of the American Agricultural Economics Association; recipient of the Zayed International Environment Prize (II: scientific and technological achievements) in 2011; and recipient of the European Lifetime Achievement Award (in Environmental and Resource Economics) from the European Association of Environmental and Resource Economists, 2014.