He came to wide international prominence as a key figure in the negotiations that led to the Oslo Accords, when he served as the Director of the Fafo institute. In 1993, he was appointed Ambassador and Special Adviser for the Middle East Peace process to the Norwegian Foreign Minister, and the following year, he became the United Nations Special Coordinator in the Occupied Territories at the rank of Under-Secretary-General. He briefly served as the Deputy Prime Minister and Minister for Planning and Cooperation of Norway in the Jagland cabinet in 1996, and returned to the United Nations, where he again became an Under-Secretary-General, serving as the UN Special Coordinator for the Middle East Peace Process and Personal Representative of the Secretary-General to the Palestine Liberation Organization and the Palestinian Authority from 1999 to 2004.
Since 2004, he has been the president of the International Peace Institute.
Rød-Larsen grew up in Bergen and studied social sciences, culminating in a Ph.D. in sociology. He taught at Norwegian universities until 1981, when he helped found FAFO, a research organization funded by the Norwegian Confederation of Trade Unions.
In 1989 Rød-Larsen moved to Cairo, when his wife Mona Juul, who worked for the Norwegian Ministry of Foreign Affairs, was stationed there. He continued to work for FAFO, as the organization had become more internationally oriented during the 1980s. Rød-Larsen performed a detailed sociological study of living conditions in the West Bank, Gaza and Eastern Jerusalem. In the course of this work, Rød-Larsen made contacts that proved to be useful in secret negotiations between Israel and the PLO. His wife was able to facilitate high-level contacts with the Norwegian foreign minister, Johan Jørgen Holst, who was instrumental in reaching the Oslo Accords in 1993. The same year Rød-Larsen became formally employed by the Norwegian Ministry of Foreign Affairs as a special advisor on Middle Eastern affairs.
In 1996, he served briefly as minister of administration in the government of Thorbjørn Jagland, before being forced to resign as the result of a tax scandal.
In 9/9/1999, he was appointed as UN Secretary-General Kofi Annan's personal representative to the PLO and Palestinian Authority on the West Bank and the Gaza Strip. He is also the UN Special Coordinator for peace negotiations in the Middle East. He subsequently left the post in 2004 to become President of the International Peace Academy, a NYC-based think tank, and was also designated as UN Special Representative (Date of Appointment : 3/1/2005) for the implementation of Security Council Resolution 1559, which calls for Syrian withdrawal of Lebanon and the disarmament of Hezbollah.
2006 Israel-Lebanon conflict 
Lebanon faces a critical test in the coming days that will determine whether the country emerges as a strong democracy or finds itself plunged back into violence, the U.N. Envoy Terje Rød-Larsen said on 20 August 2006. "As we see it, Lebanon is now facing colossal opportunities," Rød-Larsen told reporters. "There is a golden opportunity for Lebanon to solidify its democracy, to assert it authority, to produce a situation where Lebanon can be reconstructed and where Lebanese can live peacefully with its neighbors in prosperity. All this is at hand." Rød-Larsen noted approvingly that Lebanese troops have deployed in the south, where they are charged with ensuring that Hezbollah militia do not launch rockets across the border into northern Israel. Despite the "huge potential upside," Lebanon and the region also face a danger, he said. "We're at the tilting edge still, and this can easily start sliding again and lead us quickly into the abyss of violence and bloodshed. This is why diplomacy is so important." Rød-Larsen described his meetings since 18 August with Lebanese leaders as "encouraging," and said they were committed to implementing Security Council Resolution 1701, which requires that Israeli troops withdraw from south Lebanon at the same time that Lebanese army troops and a beefed-up U.N. force of 15,000 troops enter the area. He said 3,000 of a planned complement of 15,000 Lebanese soldiers have already been deployed along Lebanon's southern border, though their success in stabilizing the region is by no means guaranteed. "Of course, the devil is in the details here," he said. "It's the nitty-gritty which can make us fail." Rød-Larsen made no mention of Israeli Defense Minister Amir Peretz's comment that Israel will not allow Lebanese troops to deploy within two kilometers (1.25 miles) of the Israeli border unless they are accompanied by U.N. forces. Rød-Larsen's delegation was to depart for Israel. A "vanguard force" of 3,000 to 3,500 U.N. troops is not expected to arrive until later in the week, at the earliest. They would support about 2,000 observers already on the ground as part of the U.N. Interim Force in Lebanon. Rød-Larsen predicted that the coming weeks and months would require "very demanding diplomatic work," including "cooperation from Iran and Syria." Another 2,000 Lebanese soldiers—the first complement of an expected 8,600—have been deployed along the country's eastern border with Syria, and as many as 1,000 have been deployed along the coast, he said. The troops are expected to pave the way for a reconfigured and beefed-up UNIFIL in the south. A mechanism has been set up for both forces to work together, Rød-Larsen said, with Lebanese Prime Minister Fouad Siniora agreeing with UNIFIL force commander Gen. Alain Pellegrini to meet weekly with top security officials from both forces. The U.N. Envoy noted approvingly that Lebanese troops have deployed in the south, where they are charged with ensuring that Hezbollah forces do not launch rockets across the border into northern Israel.
The United Nations special envoy to Syria and Lebanon said on 22 August 2006 it could take the Lebanese army and international troops two to three months to fill a "security vacuum" in southern Lebanon and warned that "unintended" acts could spark renewed fighting. "There is now a security vacuum which the Lebanese government is trying to fill" with the help of international forces, said Terje Rød-Larsen. "But I think realistically, up to a point, you will have such a vacuum in Lebanon for the next two, three months," he added. "The situation is still extremely fragile... Unintended incidents can kick off renewed violence, which might escalate and spin out of control."
- "Lebanese troops deploy as part of U.N. cease-fire". CNN. 17 August 2006.[dead link]
- "U.N. envoy: Lebanon facing critical test". CNN. 20 August 2006.
- "Italy to send up to 3,000 troops to Lebanon, largest pledge so far". Haaretz. 22 August 2006. Retrieved 2006-08-22.
- Rød-Larsen's wife, Mona Juul's house bugged, Nettavisen, 20 January 2004.
- Rød-Larsen at the UN, 13 July 2004.
- Rød-Larsen overseeing Syrian withdrawal from Lebanon, 17 March 2005.
- Foreign ministry to investigate money to Rød-Larsen, 24 April 2002
- Rød-Larsen wanted to become United Nations-chief (Rød-Larsen ville bli FN-sjef)