Douglas was born in Amsterdam, New York, to Bryna (née Sanglel) and Herschel "Harry" Danielovitch, a businessman. Douglas's parents were Russian Jewish immigrants from Gomel, now in independent Belarus. His father's brother, who emigrated earlier, used the surname Demsky, which Douglas's family adopted in the United States. Douglas grew up as Izzy Demsky, although he never legally changed his name.

Coming from a poor family, as a boy, Douglas sold snacks to mill workers to earn enough to buy milk and bread. Later, he delivered newspapers and claims to have worked at more than forty jobs before becoming an actor. He found living in a family of six sisters to be stifling, "I was dying to get out. In a sense, it lit a fire under me." During high school, he acted in school plays, and discovered "The one thing in my life that I always knew, that was always constant, was that I wanted to be an actor."

Unable to afford tuition, Douglas talked his way into St. Lawrence University and received a loan, which he paid back by working part-time as a gardener and a janitor. He was a standout on the wrestling team, and wrestled one summer in a carnival to make money.

Douglas's acting talents were noticed at the American Academy of Dramatic Arts in New York City, and he received a special scholarship. One of his classmates was Betty Joan Perske (soon to be better known as Lauren Bacall), who would play an important role in launching his film career. Another classmate was aspiring Bermudian actress, Diana Dill. While doing summer stock theater during a college term break, he began using the name Kirk Douglas, which he later would legally adopt. He earned his first money as an actor that summer. Graduating from drama school, Douglas made his Broadway debut as a singing telegraph boy in Spring Again.

Douglas enlisted in the United States Navy in 1941, shortly after the United States entered World War II. He was medically discharged for war injuries in 1944. On May 3, 1943, Diana Dill, his former classmate, appeared on the cover of Life magazine. Seeing the photograph, Douglas told his fellow sailors that he was going to marry her. He did, on November 2, 1943. Their son, Michael Douglas, was born in 1944. However, they divorced in 1951.

After the war, Douglas returned to New York City and found work in radio theatre and commercials. His stage break occurred in Kiss and Tell, which led to other roles. Douglas had planned to remain a stage actor but Lauren Bacall helped him get his first screen role in the Hal B. Wallis film The Strange Love of Martha Ivers (1946), starring Barbara Stanwyck. Wallis was on his way to New York to look for new talent when Bacall suggested he visit Douglas, who was rehearsing a play called The Wind Is Ninety. Douglas finished the play's run and with no follow-up work in sight, headed to Hollywood. He was immediately cast in the leading role, and made his film acting debut as a weak man dominated by a ruthless woman, unlike his later roles where he often played dominating roles.

Douglas established his image as a tough guy in his eighth film, Champion, playing a selfish boxer. From then on, he made a career of playing "sons of bitches." From that film on, he decided that to succeed as a star, he needed to ramp up his intensity, overcome his natural shyness, and choose stronger roles. He conceded later, "I don’t think I’d be much of an actor without vanity. And I’m not interested in being a 'modest actor'." Early in his Hollywood career, he demonstrated his independent streak and broke his studio contracts to gain total control over his projects, forming his own movie company "Bryna Productions", named after his mother.

Douglas made his Broadway debut in 1949 in Chekhov's play, "The Three Sisters," a production by actress-producer Katharine Cornell.

Douglas was a major box office star in the 1950s and 60s, playing opposite some of the leading female actors of that era including Lauren Bacall, Barbara Stanwyck, Doris Day, Jeanne Crain, Rhonda Fleming, Virginia Mayo, Lizabeth Scott, Laraine Day, Jane Wyman, Eleanor Parker, Lana Turner, Kim Novak, Susan Hayward, Janet Leigh, and Jean Simmons.

Among his various roles, Douglas played a frontier peace officer in his first western Along the Great Divide (1951). Douglas quickly became comfortable with riding horses and playing gunslingers, and returned in many westerns. In Lonely Are the Brave (1962), one of his favorite roles, Douglas plays a cowboy trying to live by his own code, much as he did in real life.