Born in Melbourne, Sword was a promising ballet dancer but decided not to pursue it as a career. As a teen, she travelled to Bali and Jakarta with her father and brother, sparking an interest in the region.
She attended Monash University and University of Melbourne in the 1980s where she completed a Bachelor of Arts (Honours), majoring in Indonesian and Italian, and a Diploma of Education. While studying Indonesian at Monash, Sword met Timor-Leste (East Timorese) students and heard of their struggle for independence.
While working in Indonesia as an English teacher, humanitarian aid worker and human rights campaigner (1992 to 1996), Kirsty Sword became a clandestine activist and spy for the Timor-Leste resistance to Indonesian rule by corresponding with Xanana Gusmão who was serving a 20-year sentence in prison for leading the East Timorese resistance.
Xanana was released in 1999 and the couple married the following year in Dili. From 2002 to 2007, Xanana was President of Timor-Leste, and Sword Gusmão was First Lady.
The Goodwill Ambassador for Education of Timor-Leste and founding director of the Alola Foundation, which seeks to improve the lives of women in Timor-Leste, Kirsty Sword Gusmão AO now lives in Melbourne with their three sons.