Murray-Lyon was born in Glendale, Northumberland on 14 August 1890, the eldest son of Dr Thomas Malcolm Lyon, and a grandson of David Murray Lyon of Ayr, Scotland. He married Meredith Napier in 1916, they had two daughters and one son.
After the outbreak of the First World War in 1914 many British regiments based around the world returned to join the fighting on the Western Front, the Highland Light Infantry returned in late 1914 and was in the trenches by the beginning of 1915. During the battles of 1915 Murray-Lyon was promoted to temporary captain and wounded twice and was mentioned in despatches and received the Military Cross for his actions in Flanders. After recovering from his wounds he was based in England during 1916 as a major and Adjutant of the 4th Battalion. Murray-Lyon returned to France in December 1916 as second-in-command of the 2nd Battalion. He remained in the front lines throughout 1916 and most of 1917 with this battalion. In November 1917 he was given command of a battalion of the King's Regiment . While in command of this battalion he was awarded the Distinguished Service Order for his actions during an attack on his battalion trenches at Mœuvres, the citation read: Between 1917 and 1918 he was mentioned in despatches three times for his actions as a battalion commander. In April 1918 he was promoted to temporary lieutenant colonel and took command of the 2nd Battalion of the Highland Light Infantry. In June 1918 he was given command of the 1st/15th Battalion, Royal Scots Fusiliers. He commanded this battalion through the rest of the war.
Interbellum
Due to the down-sizing of the British Army after the First World War Murray-Lyon, along with many other officers, found commands few and far between and had their rank reduced, so Murray-Lyon became a major again. He returned to the Highland Light Infantry and became adjutant of the 6th Battalion in 1920 and later with the 2nd Battalion he held various posts in their advance parties and auxiliary forces based in Egypt and India. In 1927 he transferred across to the British Indian Army and in 1932 he was promoted to lieutenant colonel and took command of the 2nd Battalion, 4th Prince of Wales's Own Gurkha Rifles. In 1936 during fighting in Waziristan on the North West Frontier Murray-Lyon received a Bar to his DSO. He commanded the 2/4th Gurkha Rifles until 1939 when he became the Liaison Officer for the Indian Army in Scotland.
After the outbreak of the Second World War Murray-Lyon returned to India and was given command of the Zhob Brigade, a regionally based command, in 1940. In October 1940, he was given command of the newly formed 11th Indian Division.
Malaya
When the Japanese attacked Pearl Harbor on 7 December 1941 they had already sent an invasion force to attack the British forces based in Malaya. Murray-Lyon's 11th Indian Division was based in the north of Malaya, focused on the border with Thailand. Although the British Army in Malaya was expecting the Japanese invasion and had even prepared defences and plans for counterattacks, they still were overconfident and massively ill-prepared to face the highly disciplined, organised and battle experienced Japanese Army. Murray-Lyon's division looked good on paper, but in reality it consisted of two regular British Army battalions, the backbone of the division, four newly raised and half-trained Indian Army battalions and three Gurkha battalions, one of which consisted of 18-year-olds who had only recently arrived in Malaya. There were no tanks in the entire peninsula and a chronic shortage of aircraft. With this Murray-Lyon faced the Japanese attacks that came through southern Thailand in early December 1941. The Japanese assaulted Murray-Lyon's positions with incredible speed. Tanks, aircraft and infantry attacked in waves and constantly out-flanked any resistance. Before long the 11th Division was in full retreat, with the Japanese advancing so rapidly that their reconnaissance motorcyclists were often driving through the retreating columns. On one occasion Murray-Lyon was fast enough to draw his service revolver and shoot one off his motorcycle. Unfortunately for Murray-Lyon, the true extent of the ill-prepared defences of Malaya and the rapid mobility of the Japanese Army had not been discovered by the British commanders in Singapore, and as a result, he was dismissed from his command by Lieutenant General Arthur Percival on 23 December 1941. Murray-Lyon was taken prisoner by the Japanese when Singapore fell, and spent the rest of the war in captivity. Although a brave and competent commander, he was not offered another command, much to the surprise of other Indian Army officers.