Dropping out of school at the age of fifteen to join a juvenile vaudeville act, Lahr worked his way up to top billing on the Columbia Burlesque Circuit. In 1927 he debuted in on Broadway in Harry Delmar's Revels. Lahr played to packed houses, performing classic routines such as "The Song of the Woodman" (which he later reprised in the film Merry-Go-Round of 1938). Lahr had his first major success in a stage musical playing the prize fighter hero of Hold Everything! (1928-29). Several other musicals followed, notably Flying High (1930), Florenz Ziegfeld's Hot-Cha! (1932) and The Show Is On (1936) in which he co-starred with Beatrice Lillie. In 1939, he co-starred with Ethel Merman in DuBarry Was a Lady.
His later life was troubled, although he made the transition to straight theatre. He costarred in a much-praised version of Waiting for Godot in 1956 at the Coconut Grove Playhouse in Miami, Florida in which he played Estragon to Tom Ewell's Vladimir. Lahr thought of himself as the top banana in the production, telling Ewell "not to crowd him." When Beckett learned of this, he complained that the play was being taken away from his major character, Vladimir. Lahr later played Estragon in the play's short-lived Broadway run.
Among other Broadway roles, Lahr played Queen Victoria in a sketch from the musical Two on the Aisle. He also performed as Moonface Martin in a television version of Anything Goes with Ethel Merman reprising her role as Reno Sweeney and Frank Sinatra as Billy Crocker. In the late 1950s, Lahr supplied the voice of an animated bloodhound in Old Whiff, a short cartoon produced by Mike Todd which featured the olfactory Smell-O-Vision process developed for Todd's feature film Scent of Mystery (1960). In 1964 he won the Tony Award for Best Leading Actor in a Musical for his role in the musical Foxy.
In 1967, Lahr died of pneumonia in New York City in the middle of filming The Night They Raided Minsky's, forcing producers to use a double in several scenes. Fittingly, this last role was as a burlesque comic. Lahr is buried at Union Field Cemetery in Ridgewood, Queens.
His son, New Yorker theater critic John Lahr, wrote a biography of his father's life titled Notes on a Cowardly Lion. His daughter Jane Lahr was in the documentary Memories of Oz on the television network Turner Classic Movies in 2001.