Badruddin Tyabji was the son of Cambay merchant, Tyab Ali, and his wife, Ameena, the daughter of a rich mullah, Meher Ali. Tyab All of Tyab Ali's sons went to England for further education or trade. His elder brother, Camruddin, had been the first Indian solictor admitted in England, and inspired the 15-year-old Badruddin to join the Bar.

In April 1860 Tyabji went to England to study at the Highbury New Park College. His father gave him letters of introduction to Lord Ellenborough, the retired Viceroy of India. Tyabji passed the London matriculation examination and entered London University and the Middle Temple as a student in 1863. Because of deteriorating eyesight he returned to Bombay in late 1864 but resumed terms at the Middle Temple in late 1865. While in India he was married to a 14-year-old girl. He was called to the Bar in April 1867, and on his return to Bombay in December 1867 became the first Indian barrister in the High Court of Bombay.

Tyabji was elected to the municipal corporation in 1873. He was a member of the University of Bombay senate (1875–1905) and appointed to the Bombay legislative council in 1882, resigning in 1886 owing to ill health. Along with Pherozeshah Mehta and K. T. Telang, he was largely responsible for forming the Bombay Presidency Association in 1885, a body which championed Indian interests and hosted the first meeting of the Indian National Congress in Bombay at the end of 1885. Tyabji was the third President of Congress. He was deeply concerned with matters affecting Muslims. To promote social interaction among the city's Muslims, Tyabji was instrumental in founding both the Islam Club and the Islam Gymkhana. He sent all of his daughters to be educated in Bombay and in 1904 he sent two of them to boarding school in Haslemere in England.

In June 1895 Tyabji was made a judge of the Bombay High Court, the first Muslim and the third Indian to be so elevated. While on a year's furlough in London in 1906 Tyabji died suddenly of a heart attack.