Östlund was born in Styrsö, Gothenburg Municipality, Sweden. He started as a Director of skiing films in the 1990s, and eventually went on to study at the film school in Gothenburg, from which he graduated in 2001. He was accepted to the school based on his skiing films. Together with film Producer Erik Hemmendorff he is the co-founder of the production company Plattform Produktion, which produces his films.
His first four feature-length fiction films were The Guitar Mongoloid (2004), Involuntary (2008), Play (2011), and Force Majeure (2014). The Guitar Mongoloid won the FIPRESCI Award at the 27th Moscow International Film Festival. Östlund's short film Incident by a Bank won the Golden Bear for Best Short Film at the 60th Berlin International Film Festival. and Grand Prix at Tampere Film Festival in 2011.
His film Force Majeure was selected to compete in the Un Certain Regard section at the 2014 Cannes Film Festival where it won the Jury Prize. Sweden then submitted Force Majeure for the Academy Award for Best Foreign Language Film. After the Academy shortlisted but did not nominate it, Östlund released a humorous video of his response to missing the nomination list. In 2016 he was a member of the jury for the Un Certain Regard section of Cannes.
In 2017, his film The Square, loosely inspired by some of his own experiences and art installation with Kalle Boman, competed at the Cannes Film Festival, where it ultimately won the prestigious Palme d'Or. Afterwards, he pursued the project Triangle of Sadness, a film about fashion Models.