Born near Sharpsburg, Kentucky, on 24 February 1811 to James H. and Mary Higgins Lane, Henry Smith Lane was privately tutored in classical education. Later, he studied law and was admitted to the bar in Mount Sterling in 1832. By 1835, he had moved to Crawfordsville, Indiana, where he worked at the Bank of Indiana and later opened his own law office where he handled criminal cases.

Early on he expressed his opposition to slavery and eventually supported Henry Clay while still in Kentucky. In October 1831, he gave an anti-slavery speech to the Colonization Society, during which he expressed his view that "The History of all times admonishes us that no man or community of men can be kept forever in slavery". Like Clay, Lane was opposed to the abolition of slavery, instead believing that its expansion should be curtailed. The natural outcome of this, he argued, was that it would ultimately die out.

In 1833 he was wedded to Pamela Bledsoe Jameson. The marriage produced no children and was ended when his wife was killed in a stage coach accident in 1842. Lane himself walked away from the accident with only minor injuries.

He was politically active and a member of the Whig party, becoming a member of the senate in Indiana in 1837 as a representative of Montgomery County. From 1838–1839, he served as a member of the Indiana House of Representatives. After the resignation of Tilghman A. Howard from the U.S. House of Representatives the following year, Henry Smith Lane was chosen to fill the vacancy. He retained his seat the following year, overwhelmingly defeating his opponent, John Bryce, and stayed until 1843. During his time in office, he supported compromising with the South over slavery issues, condemning abolitionists as agitators who promoted disunity. After a total of about 3 years in that position, he chose not to seek reelection.