He was born in Fukusaki, Hyōgo Prefecture. After graduating with a degree in law from Tokyo Imperial University, he became employed as a bureaucrat in the Ministry of Agriculture and Commerce. In the course of his bureaucratic duties, Yanagita had the opportunity to travel throughout mainland Japan. During these business trips, Yanagita became increasingly interested in observing and recording details pertaining to local village customs. Under the influence of literary friends such as the writer Shimazaki Toson, Yanagita published works supposedly based on local oral traditions such as Tales of Tono (1912). He collaborated extensively with folklorist Kizen Sasaki and they published several books together.
Yanagita's focus on local traditions was part of a larger effort to insert the lives of commoners into narratives of Japanese History. He argued that historical narratives were typically dominated by events pertaining to rulers and high-ranking officials. Yanagita claimed that these narratives focused on elite-centered historical events and ignored the relative uneventfulness and repetition that characterized the lives of ordinary Japanese people across history. Critics of Yanagita's work assert that his conception of "the common people" is overly homogenous, eliding most local difference and conflict in favor of an organic conception of the Japanese nation-state.
He was also interested in Esperanto.