A child prodigy, Boulanger's talent was apparent even at the age of two, spotted by her parents, both of whom were musicians themselves and encouraged their daughter's musical education. (Her mother, Raissa Myshetskaya (Mischetzky), was a Russian princess, who married her Paris Conservatoire teacher, Ernest Boulanger; grandfather Frédéric Boulanger had been a noted cellist, and grandmother Juliette a singer.) Boulanger accompanied the ten-year-old Nadia to classes at the Paris Conservatoire before she was five, shortly thereafter sitting in on classes on music theory and studying organ with Louis Vierne; she also sang and played piano, violin, cello, and harp. In 1913, at the age of 19, she won the Prix de Rome for her Faust et Hélène, becoming the first woman composer to win the prize; Nadia had given up entering after four unsuccessful attempts and had focused her efforts upon guiding her sister.

Lili, first a student of Nadia and then of Paul Vidal, Georges Caussade, and Gabriel Fauré—the last of which who was greatly impressed by the young woman's talents and frequently brought songs for her to read—was greatly affected by the 1899 death of her father; many of her works touch on themes of grief and loss. Her work was noted for its colorful harmony and instrumentation and skillful text setting; aspects of Fauré and Claude Debussy can be seen in her compositions, and Arthur Honegger was one composer influenced by her innovative work. Jazz pianist Herbie Hancock has said she is one of his favorite composers.

Her life and work were troubled by chronic illness, beginning with a case of bronchial pneumonia at age two that weakened her immune system, leading to the intestinal tuberculosis (now called Crohn's Disease) that cut short her life at age 24. Though she loved travel, completing several works in Italy after winning the Prix de Rome, her failing health forced her to return home, where she and Nadia organized efforts to support French soldiers in World War I. Her last years were also a productive time musically as she labored to complete works previously left unfinished. Boulanger was buried in Paris, in the Cimetière de Montmartre, leaving unfinished the opera La princesse Maleine on which she spent most of the last years of her life.