Papademos was born on 11 October 1947 in Athens, to a family that hailed from Desfina, Phocis prefecture, Central Greece. He attended the Massachusetts Institute of Technology (MIT), gaining a Bachelor's degree in Physics in 1970, a Masters degree in Electrical Engineering in 1972 and a doctorate in Economics, in 1978.
He served as Senior Economist at the Federal Reserve Bank of Boston in 1980. In 1985, he returned to Greece and joined the Bank of Greece as economic adviser, rising to Deputy Governor in 1993 and Governor in 1994. During his time as Governor of the Bank of Greece (1994 - 2002), Papademos was involved in Greece's transition from the drachma to the euro as its national currency.
In November 2011, Papademos was proposed as head of an interim, national unity government to pull Greece out of its economic crisis. He was sworn in on November 11, 2011 heading a government with ministers from the Panhellenic Socialist Movement (PASOK), New Democracy and the Popular Orthodox Rally (LAOS) parties.