Carlyle, born in Glasgow, was abandoned by his mother at the age of four. Inspired after reading Arthur Miller's The Crucible, he enrolled in acting class at the age of 21, at the Glasgow Arts Centre. In 1991, he and four friends founded an acting company and guest starring in The Bill. He first came to the attention of the public as a psychotic murderer in an episode of Cracker (in which he killed the character played by Christopher Eccleston among others), but was soon playing a more sympathetic role, that of Highland policeman, Hamish Macbeth, in the eponymous BBC comedy-drama.

In 1997, Carlyle married Anastasia Shirley. In 2002, she gave birth to their first child, daughter Ava.

Carlyle is perhaps best remembered for his role in The Full Monty, as the leader of a group of men who must perform striptease to earn their living, and Trainspotting, in which he played the psychopathic thug Begbie. Other memorable roles included the villain Renard in the James Bond film The World Is Not Enough, a cannibalistic Mexican-American War soldier in Ravenous, the gay lover of Fr. Greg in Priest and Hitler in Hitler: The Rise of Evil.