He was born in England, the son of the folklorist Moses Gaster, then Chief Rabbi of English Sephardi community, who was Romanian by birth and a well-kown linguist and scholar of Judaica. He was also a leading Zionist, and named his son after his friend,Theodor Herzl, who had died in 1904, shortly before the boy's birth. Theodor recalled that the first draft of the Balfour Declaration of 1917 was prepared in his father's home. His mother was the daughter of Michael Friedländer. Visitors to the Gaster home included Churchill, Lenin and Freud.
Theodor Gaster was educated in London. He received an undergraduate degree in classics from the University of London in 1928 and a master's degree in Near Eastern archaeology, also from the University of London, in 1936. His master's thesis, a preview of his key work, was titled "The Ras Shamra Texts and the Origins of Drama."
In 1939 or 1940 Gaster moved from London to New York and began work on a Ph.D. at Columbia University. While pursuing his doctorate he continued to publish.
In 1942 he began teaching part time in the graduate school at Columbia University, and in 1945 he also began teaching part time at Dropsie College, in Philadelphia. From 1946 to 1950 he was a lecturer on Semitic civilization at New York University. From the mid-1940s until the mid-1960s, he was a visiting professor at many colleges and universities in the United States and three times at the University of Leeds.
Gaster's first full-time American post came in 1945, when he served for a year and a half as chief of the Hebraic Section of the Library of Congress in Washington, D.C. In 1951 and 1952, he was a Fulbright Fellow in the history of religions at the University of Rome, and in 1961 he was a Fulbright Fellow in biblical studies and history of religions at the University of Melbourne.
Most of the books for which Gaster is best known were published in the 1950s, including his translation of the Dead Sea Scrolls, widely admired for its felicitousness; Thespis, his application of the Frazerian myth-and-ritual theory to the ancient Near East and beyond; and his abridgment and updating of James Frazer's The Golden Bough (The New Golden Bough ), in which he retained the theory but updated the data. This abridgement was of Frazer's third twelve-volume edition of his opus, which Frazer himself had abridged into one volume in 1922. Gaster's final major work, the two-volume tome Myth, Legend, and Custom in the Old Testament (1969). was similarly an abridgement and updating of Frazer's Folk-lore in the Old Testament.
Only in 1966, at the age of sixty, did Gaster secure a permanent full-time academic post, as professor of religion at Barnard College, the women's undergraduate division of Columbia University. He helped revamp the curriculum and was Head of the Department of Religion from 1968-1972. He continued to lecture widely, and from 1971 to 1981 he was professor of religion and director of ancient Near Eastern studies at Dropsie College, by then renamed Dropsie University.
Upon his retirement from Barnard, he was once again a visiting professor at many American universities. He relocated to Florida to teach for several years at the University of Florida. He died in Philadelphia, where he had moved in 1988.
Prof. Elaine Pagels, who taught for a time at Barnard College, notes in her book Beyond Belief: The Secret Gospel of Thomas (2003), that Gaster, her Barnard colleague, was "the 13th son of the Chief Rabbi of London." He knew all the languages of the Bible, and, at one time in 1976, students in one of his classes heard that he knew 32 languages in all. His teaching was full of warm humanity, humor, challenge, encouragement, and wit.
Rev. Mark Alterman, well known Hebrew Christian Evangelist(koshergospel.com) was a student of Dr Gaster at the Dropsie University of Hebrew and Cognate Learning in Philadelphia, PA.