He was the joint top scorer at the UEFA Euro 1992 which he won with the Danish national team. He was also part of the Danish squad at Euro 96 where he played his last national team game. In all, he played 39 national team matches and scored five goals. In 1998 he announced he was marrying an English sports reporter, Sacha Crowther, whom he had met at the UEFA European Championship two years earlier.
He started his career in Denmark for Taarbæk IF and then later Lyngby Boldklub. He won the 1985 Danish Cup trophy with Lyngby, and made his Danish national team debut in February 1989. In April 1990, he agreed a move abroad to play for Italian club Pisa Calcio, who were leading the promotion battle in the secondary Serie B division. Larsen was named Man of the Match, as he won the 1990 Danish Cup with Lyngby, before moving to Italy in June 1990. He joined Pisa in the Serie A championship, but in his first year at the club, Pisa were relegated to the Serie B again. As Serie B regulations only allowed two foreign players in the team, Larsen had to look for playing time elsewhere, when the club preferred ArgentiniansDiego Simeone and Jose Chamot.
After the Euro 92 tournament, Larsen moved back to Pisa in the Serie B. Simeone had been sold, but following the first few league games for the club, Larsen was put on sale. A number of European clubs were interested in him, but Pisa's pricetag of DKK 50 million kept all interest at bay. Larsen eventually moved to Aston Villa FC in England on a loan deal in January 1993. His stay in Aston Villa was short, as he had trouble forcing his way into the team under manager Ron Atkinson. In March 1993, he was told by Atkinson he wasn't needed, but as Pisa didn't want him back, he stayed at Villa's reserve team until May 1993.
He was loaned out to German club Waldhof Mannheim in the 2. Bundesliga in 1993, where he played well. He returned to Denmark in 1994, to play for Lyngby on a season-long loan deal. Larsen was set free from his Pisa contract in February 1995, when his transfer rights were given to Lyngby. He was called up for the Danish squad for Euro 96, by national manager Møller Nielsen. He took part in all Denmark's three matches, before ending his national team career when Denmark were eliminated. After Euro 96, he moved to league rivals FC Copenhagen, with whom he won the 1997 Danish Cup. He ended his career in 1999.
He underwent a season-long loan deal back in Lyngby, where he helped the club win the 1992 Danish Superliga championship. He was selected for the Danish team to compete at the Euro 92 tournament. He started the tournament as a substitute, but Larsen went on to score three goals at Euro 92, including both goals in the 2–2 semi-final draw against the Netherlands. He scored at his attempt in the ensuing penalty shootout, and played full time when he and the Danish national team won the final against Germany.
Following his retirement, he became assistant coach at FC Copenhagen, before managing Ølstykke FC. He was head coach of the Faroe Islands national team until 2005, as well as associated coach of the talent team in Lyngby Boldklub, for whose old boys team he is also playing. In 2006 he was caretaker manager in Holbæk B&I, before signing on with Køge Boldklub in June 2006 and was here coach until June 2008. Larsen was named as the new head coach from Lyngby Boldklub on 15 July 2008 and was then fired after eight months on 30 March 2009. He was the new assistant manager at the Danish football club Randers FC, when the season 2009–10 started, together with an other Danish football legend Flemming Povlsen. They were both assistant managers for the Randers FC manager John Faxe Jensen but the trio was fired on 6 October 2009.