Douglas, the son of film legend Kirk Douglas (Douglas, Kirk) and British actress Diana Dill, received much of his education in filmmaking by accompanying his father to various film locations. After studying drama at the University of California at Santa Barbara (B.A., 1968), Douglas made his screen debut in Hail, Hero! (1969), a Vietnam-era antiwar film now regarded as hyperbolic and dated. He made a handful of mostly forgettable films—the best of which was the Disney-produced family adventure Napoleon and Samantha (1972)—before landing the role of Steve Keller on the popular television series The Streets of San Francisco (1972), costarring with veteran actor Karl Malden.

Douglas became a driving force in the entertainment industry when he produced a screen rendering of Ken Kesey (Kesey, Ken)'s novel One Flew Over the Cuckoo's Nest (1975). Douglas's father had acquired the rights to Cuckoo's Nest when he starred in a Broadway adaptation during the early 1960s, and for many years he had tried to interest a producer in a film version; when his efforts failed, he sold the rights to his son, who in turn produced only the second film in Hollywood history to win Academy Awards in all five major categories: best picture, best actor (Jack Nicholson (Nicholson, Jack)), best actress (Louise Fletcher), best director (Miloš Forman (Forman, Miloš)), and best screenplay. From this triumph, Douglas went on to both produce and star in some of the biggest box-office hits of the next two decades.

Douglas coproduced and costarred in The China Syndrome (1979), a taut thriller set in a nuclear power plant that was ironically and fortuitously released the same week as the real-life nuclear crisis at Three Mile Island. He appeared with Kathleen Turner and Danny DeVito in the highly successful action-adventure Romancing the Stone (1984), and its sequel, The Jewel of the Nile (1985), and again teamed with the same costars for the popular dark comedy The War of the Roses (1989). One of Douglas's landmark roles was in Fatal Attraction (1987), in which he portrayed a family man terrorized by a woman (memorably portrayed by Glenn Close) with whom he has an adulterous affair. In the same year, Douglas delivered an Oscar-winning performance as a ruthless, morally empty financier in Wall Street (1987). Douglas's screen persona is well-showcased in this film, in that his antiheroic character of Gordon Gekko—whose personal credo is “greed is good”—is both unctuous and charismatic. Several of Douglas's performances flaunt this dichotomy: his villainous characters exhibit personal magnetism, and his heroes are often victim to their own inadequacies. He (like his father) is one of the few actors to build a successful career out of portraying less-than-virtuous characters.

Basic Instinct (1992), a film as controversial as it was successful, was in the same genre as Fatal Attraction and served to pigeonhole Douglas as an actor specializing in violent or sexual fare. Such films as Black Rain (1989), Falling Down (1993), and Disclosure (1994) added to this characterization. Endeavouring to change his image, Douglas starred in the romantic comedy The American President (1995), in which he portrays a widowed chief executive. In 2000 he received widespread praise for his performances as a depressive college professor in Wonder Boys and as the recently appointed American drug czar in Traffic; he costarred with Catherine Zeta-Jones (Zeta-Jones, Catherine) in the latter film, and the couple married that same year. Douglas starred alongside his father, Kirk, and his son, Cameron, in It Runs in the Family (2003), about three generations of a dysfunctional Manhattan family. He later played a secret service agent wrongly accused of being part of an assassination attempt in The Sentinel (2006), and in King of California (2007) he portrayed a patient recently released from a mental hospital who is looking for gold underneath a discount store. Douglas also produced the films Starman (1984), Flatliners (1990), Face/Off (1997), and The Rainmaker (1997).