When Lagerbäck was 13 years-old, he played for Alby FF's P16 team. In 1970, he left and moved to Gimonäs CK under the guidance of Calle Lindelöf.

In 1977, he was called up to the Swedish national team. He coached the Division IV team until 1982 before moving to Arbrå IK , where he remained until 1985. In 1987, he took over Hudiksvall ABK but leaves by 1989.

In 1990, Lagerbäck began work with the Swedish Football Association. In 2000, he was promoted to dual-coach, a responsibility he shared with Söderberg until 2004.

Under his guidance, the Swedish National Team qualified for the Euro 2000 but lost in the group stages.

In 2002, he led Sweden to the World Cup where Sweden was in 'group death'. Sweden lost against Senegal. In 2004, Sweden qualified for their third straight championship. In the Euro 2004, Sweden made it to the quarter-finals where they lost against Holland.

In 2006, Lagerback took Sweden to their fourth consecutive championship for the first time in Swedish history. The tournament was the 2006 World Cup, where they lost out to Germany in the knock-out stages at a 2–0 margin. Under Lagerbäck, Sweden also qualified for UEFA Euro 2008 before getting eliminated in the group stages after 2-0 loss to Russia.

After Sweden's unsuccessful qualification campaign for this summer's World Cup in South Africa, Lagerbäck resigned.

In 26 February, 2010, after much speculation. Lagerback signed a renewable five month contract as coach for the Nigerian football team. He will lead the country in the 2010 World Cup in South Africa.