He was born in North Dakota and attended UCLA before moving to England to begin his career in film. He returned to the US and from the early 1930s to the 1950s, Lyon was exclusively an editor. He had worked on 25 films as an editor including The Men in Her Life (1941), Body and Soul (1947) and The Young and The Brave (1963). He moved on to directing, and was credited on more than over 20 additional films before eventually retiring from the entertainment industry in 1970.
In 1993, Lyon published a memoir entitled Twists of Fate: An Oscar Winner's International Career.