Karl Kautsky was born in Prague of artistic middle class parents. The family moved to Vienna when he was seven years old. He was studying history and philosophy at the University of Vienna in 1874, and became a member of the Social Democratic Party of Austria (SPÖ) in 1875. In 1880 he joined a group of German socialists in Zurich who were supported financially by Karl Höchberg, and who smuggled socialist material into the Reich at the time of the Anti-Socialist Laws. Influenced by Eduard Bernstein, Höchberg's secretary, he became a Marxist and in 1881 visited Marx and Engels in England.
In 1883, Kautsky founded the monthly Die Neue Zeit ("The New Time") in Stuttgart, which became a weekly in 1890, and was its editor until September 1917 which gave him a steady income and allowed him to propagate Marxism. From 1885 to 1890, he spent time in London, where he became a close friend of Friedrich Engels. In 1891, he co-authored the Erfurt Program of the Social Democratic Party of Germany (SPD) together with August Bebel and Eduard Bernstein.
Following the death of Engels in 1895, Kautsky became one of the most important and influential theoreticians of Marxism, representing the centre current of the party together with August Bebel. When Bernstein attacked the traditional Marxist position on the necessity for revolution in the later 1890s, Kautsky denounced him, arguing that Bernstein's emphasis on the ethical foundations of Socialism opened the road to a call for an alliance with the "progressive" bourgeoisie and a non-class approach.
In 1914, when the German Social-Democrat deputies in the Reichstag voted for the war credits, Kautsky, who was not a deputy but attended their meetings, had suggested abstaining. Kautsky claimed that Germany was waging a defensive war against the threat of Czarist Russia. However, in June 1915, about ten months after the war had begun and when it had become obvious that this was going to be a sustained, appallingly brutal and costly struggle, he issued an appeal with Eduard Bernstein and Hugo Haase against the pro-war leaders of the SPD and denounced the government's annexationist aims. In 1917 he left the SPD for the Independent Social Democratic Party of Germany (USPD), which united Socialists who opposed the war.
After the November Revolution in Germany, Kautsky served as under-secretary of State in the Foreign Office in the short lived SPD-USPD revolutionary government and worked at finding documents which proved the war guilt of Imperial Germany.
After 1919, Kautsky's prominence steadily diminished. He visited Georgia in 1920 and wrote a book in 1921 on this Social Democratic country still independent of Bolshevist Russia. In 1920, when the USPD split, he went with a minority of that party back into the SPD. At the age of 70 he moved back to Vienna with his family in 1924 where he remained until 1938. At the time of Hitler's Anschluss, he fled to Czechoslovakia and thence by plane to Amsterdam where he died in the same year.
Karl Kautsky lived in Berlin-Friedenau for many years; his wife, Luise Kautsky, was a close friend of Rosa Luxemburg, who also lived in Friedenau, and today there is a commemorative plaque where Kautsky lived at Saarstraße 14.
Kautsky was described as a "renegade" by Vladimir Lenin, and he in turn castigated Lenin in his 1934 work Marxism and Bolshevism: Democracy and Dictatorship:
His work Social Democracy vs. Communism treated the Bolshevist rule in Russia. In Kautsky's view, Bolsheviks (or, Communists) had been a conspirational organisation, which gained power by a coup and initiated revolutionary changes for which there were no economic presumptions in Russia. Instead, a bureaucratic society developed, misery of which eclipsed the problems of the Western capitalism. The attempts (be it undertaken by Lenin or Stalin) of building a working and affluent socialist society failed.