instead joined the Paris office of prestigious US legal consulting giant Baker & McKenzie.
Over 18 years she pushed her way up to become chairwoman of the company's global executive committee in 1999, a first for the firm, and then of its global strategy committee in 2004.
Then in 2007 she became France's and the G7's first female finance minister, earning a reputation for grace under fire during the global economic crisis.
Lagarde, 55, was born in Paris to academic parents and brought up in the port city of Le Havre.
A synchronized swimming champion as a teenager, with near-flawless English, she studied law and political science in university.
After being admitted to the Paris bar in 1981, she joined Baker & McKenzie, specialising in labour and anti-trust issues as well as takeovers.
There she rose up in the ranks quickly to become a partner in the Paris office, before moving to Chicago to ultimately oversee global operations.
Lagarde entered politics in June 2005 when she was invited to join the government of then-president Jacques Chirac as trade minister.
Two years later Chirac's successor Nicolas Sarkozy named her agriculture minister, and then in an unexpected reshuffle appointed her finance minister.
Though no economist, she proved herself extremely deft at dealing with the financial crisis that began to erupt that year in the united States and quickly spread.
As the then-head of the eurozone finance ministers, she was a leading figure in Europe's response to the crisis, and a linchpin of Sarkozy's government.
In 2011, with France in charge of the G20 group of the world's largest economies, she became the pointwoman on continued efforts to combat the effects of the crisis and reform the global financial system.
That all made her a fixture on the world stage, with close relations to counterparts from Beijing to Brasilia which underpinned the support she got when the IMF position suddenly came open, after her French colleague Dominique Strauss-Kahn was arrested in New York on charges of alleged sexual assault.
Complimented by some for her smooth handling of the monumental crisis and criticised by others for stubbornness, she is a respected negotiator and political consensus-builder.
She made only a handful of political public faux pas in office in France, and was even mentioned as a possible successor to Sarkozy -- though she had not shown that kind of political ambition.
Indeed, she lost her only attempt at standing for election in Paris in 2008.
Only recent accusations of conflict of interest have clouded her reputation.
In May a prosecutor called for a probe into her handling of a high-profile dispute that resulted in a 240-million-euro ($345-million) government payout to flamboyant tycoon Bernard Tapie.
But the French court has put off until July 8 the decision on whether a full investigation is merited.
Questions have also been raised about an investment by Lagarde in a start-up led by the son of a state-run agency boss she appointed.
She has repeatedly dismissed both accusations as groundless and a "smear".
On the personal side, Lagarde is the divorced mother of two sons, both in their 20s, and has a regular companion in Marseille businessman Xavier Giocanti, a old schoolmate who brought two children from his own previous marriage to the couple.