Egas Moniz was born at Avanca in Portugal and educated at the University of Coimbra, where he gained his MD in 1899. After postgraduate work in Paris and Bordeaux he returned to Coimbra, becoming a professor in the medical faculty in 1902. He moved to Lisbon in 1911 to a newly created chair of neurology, a post he retained until his retirement in 1944. At the same time he was pursuing a successful political career, being elected to the National Assembly in 1900. He served as ambassador to Spain in 1917 and in the following year became foreign minister, leading his country's delegation to the Paris Peace Conference.

Egas Moniz achieved his first major success in the 1920s in the field of angiography (the study of the cardiovascular system using dyes that are opaque to x-rays). In collaboration with Almeida Lima, he injected such radiopaque dyes into the arteries, enabling the blood vessels of the brain to be photographed. In 1927 he was able to show that displacements in the cerebral circulation could be used to infer the presence and location of brain tumors, publishing a detailed account of his technique in 1931.

Egas Moniz is better known for his introduction in 1935 of the operation of prefrontal leukotomy. It was for this work, described by the Nobel authorities as “one of the most important discoveries ever made in psychiatric therapy,” that they awarded him the 1949 Nobel Prize for physiology or medicine.

The operation consisted of inserting a sharp knife into the prefrontal lobe of the brain, roughly the area above and between the eyes; it required the minimum of equipment and lasted less than five minutes. The technique was suggested to Egas Moniz on hearing an account (by John Fulton and Carlyle Jacobsen in 1935) of a refractory chimpanzee that became less aggressive after its frontal lobes had been excised. Egas Moniz believed that a similar surgical operation would relieve severe emotional tension in psychiatric patients. He claimed that 14 of the first 20 patients operated upon were either cured or improved. The operation generated much controversy, since the extent of the improvement in the patients' symptoms was not easy to judge and the procedure often produced severe side-effects. Today a more refined version of the operation, in which selective incisions are made in smaller areas of the brain, is still quite widely practiced.