Rydell came from a family with a flower boutique business and trained briefly as an accountant before motorsport took hold. He competed in Swedish Formula Three in 1987 and 1988, British F3 in 1989 and 1991, and Japanese F3 in 1992 and 1993. He raced in F3000 in 1990. At the 1991 Macau Grand Prix he took pole position, and he went on to win the 1992 Macau Grand Prix. In 1984 and 1985 he had won the Swedish 100cc go-kart championship.
Rydell joined the BTCC in 1994 with the TWR Volvo squad, most notably driving the Volvo 850 Estate in his debut season — unusual in a field that standardly used saloon-bodied cars. The team switched to a saloon body for 1995, and Rydell qualified on pole for 13 of the 24 races, converting those into four wins and seven podiums to finish third in the championship. He was third again in 1996 despite Audi's Frank Biela dominating, taking four victories. In 1997 Volvo moved to the new S40 model; Rydell took one win and finished fourth.
In 1998 Rydell finally claimed the BTCC title, winning five races and achieving 12 podium finishes in a Volvo S40, beating Anthony Reid at the final meeting. The same year he won the Super Touring Bathurst 1000, sharing a Volvo S40 with Jim Richards. In 1999, with the TWR operation winding down, Rydell remained competitive with four victories and seven podiums, finishing third. For 2000 he was loaned to Prodrive-run Ford and finished third again, behind team-mates Alain Menu and Anthony Reid.
Rydell moved to the ETCC in 2001 with a Volvo S60, though he spent much of that year waiting for the car to be built. He returned to full-time ETCC competition in 2002, finishing fifth with eight podiums, before switching to SEAT for 2004 in the Toledo Cupra, taking one victory and finishing tenth.
When the ETCC became the WTCC for 2005, Rydell continued with SEAT. He finished sixth in the championship that year, winning race two at Silverstone. He remained with SEAT for 2006, finishing seventh. Without a SEAT drive in 2007, he raced an Aston Martin DBR9 with Prodrive in the FIA GT Championship, winning the GT1 class at the 24 Hours of Le Mans alongside David Brabham and Darren Turner. He also made a guest WTCC appearance at Anderstorp for Chevrolet, where he won the second race — ahead of teammates Larini and Menu, and against team orders — before returning briefly for SEAT at the Macau finale, unable to prevent BMW from claiming the Manufacturers' title.
Rydell was re-signed by SEAT for the full 2008 WTCC season, taking wins at Estoril and Okayama and finishing fifth in the championship. In 2009 he won at Puebla and finished seventh.
Alongside his touring car programmes, Rydell competed with Prodrive in GT racing. In 2001 he drove a Ferrari 550 GTS Maranello in the FIA GT Championship, winning twice overall at the A1 Ring and Jarama and finishing third at the Nürburgring. At the 2002 24 Hours of Le Mans he raced the same Ferrari before retiring. In 2004 he shared a Prodrive Ferrari with Darren Turner and Colin McRae, finishing third in the GTS class. His greatest GT achievement came in 2007 when he won the GT1 class at Le Mans in an Aston Martin DBR9 with Turner and Brabham.
After a year working as a television commentator for Swedish coverage of the STCC, Rydell came back to racing in 2011 with the Chevrolet Motorsport Sweden team in the Scandinavian Touring Car Championship. He won the title at the final race of the season at Mantorp by two points over Frederik Ekblom, his second national touring car title. He made a further appearance in the WTCC at the 2013 Race of China with NIKA Racing, driving a Chevrolet Cruze 1.6T.
A 2005 Motorsport Magazine poll of readers voted Rydell the eighteenth greatest touring car driver of all time. His career placed him among the leading touring car drivers of the BTCC's Super Touring era and the WTCC's early seasons, combining title-winning consistency with victories at some of motorsport's most prestigious venues. He was particularly associated with Volvo across more than half a decade of BTCC competition before diversifying into GT and international touring car racing.