LaDuke was born in Los Angeles, California to Vincent and Betty LaDuke. Her father was part Anishinaabe (Ojibwe or "Chippewa") from an Indian reservation of Minnesota. He was an actor with supporting roles in Western movies, an activist, a writer, and at the end of his life, a spiritual guru under the name Sun Bear.Her mother was a Jewish artist, employed as an art professor at Southern Oregon University in Ashland, Oregon. LaDuke is the mother of five.

LaDuke was raised in Ashland,but after graduating from Harvard in 1982 with a degree in rural economic development, she accepted a job as principal of the high school on the Ojibwe White Earth Indian Reservation in Minnesota. She soon became an activist, involved in the struggle to recover lands promised to the Ojibwe by an 1867 treaty. She helped the Ojibwe buy back thousands of acres of ancestral land.

She worked with Women of All Red Nations to publicize the alarmingly high level of forced sterilization among Native American women.