Lue attended Raytown Senior High School in Raytown, Missouri. He later went to University of Nebraska. He played basketball and studied Sociology. He finished his Nebraska career ranked third on the all-time list in assists (432), fourth in three-pointers made (145) and attempted (407), fifth in steals (154) and seventh in scoring (1,577). Declaring for the NBA draft after his Junior season, he led the Cornhuskers in assists in each of his three seasons, and finished his career tied with Dave Hoppen for most games with 30 or more points (7).
Lue opted for early entry into the 1998 NBA Draft. He was selected 23rd overall by the Denver Nuggets, but was traded to the Los Angeles Lakers with Tony Battie in exchange for Nick Van Exel on draft night. His first three years with the Lakers were disappointing. His playing time was limited, and he suffered from injuries in 2000. However, Lue excelled in the 2001 playoffs. Due to his quickness, he was specifically used to guard Allen Iverson during the NBA Finals. The Lakers' 4-1 series victory over Iverson's 76ers gave them the second of three consecutive titles.
In the off-season of 2001, Lue signed with the Washington Wizards, where he got considerably more playing time and subsequently became a better player at the point. He played with the Orlando Magic in 2003–04 where he got to play a lot of minutes alongside Tracy McGrady while leading the team to the worst record in the NBA that season: 21–61. After the season Lue, along with Juwan Howard and McGrady were traded to the Houston Rockets for Steve Francis, Cuttino Mobley and Kelvin Cato. In Houston, Lue did not get many minutes of playing time because of the number of point guards the Rockets had on their roster. He was traded during the mid-season to the Atlanta Hawks for Jon Barry. Lue starred in Atlanta, although he again led the team with the worst record in the NBA that year, and the worst record in franchise history: 13–69.
On February 16, 2008, Lue was acquired by the Sacramento Kings in a trade with the Atlanta Hawks. He was waived by the Kings on February 28, 2008. After clearing waivers, Lue signed a contract with the Dallas Mavericks on March 4.