Kaiser's father was a merchant, and he apprenticed in the same trade. He went to Argentina as a clerk but contracted malaria and was forced to return to Germany. During a long convalescence he wrote his first plays, mainly satirical comedies that attracted little attention. His first success was Die Bürger von Calais (1914; The Burghers of Calais). Produced in 1917 at the height of World War I, the play was an appeal for peace in which Kaiser revealed his outstanding gift for constructing close-knit drama expressed in trenchant and impassioned language. He followed this with a series of plays in which he showed man in deadly conflict with the modern world of money and machines: Von Morgens bis Mitternachts (1916; From Morn to Midnight), and the Gas trilogy, consisting of Die Koralle (1917; The Coral), Gas I (1918), and Gas II (1920). Written in terse and fragmented prose, these plays established him as a leader of the Expressionist movement.

In 1920 Kaiser was arrested for selling the furniture of a house he was renting. Arguing that artists deserve special treatment before the law, he defended his actions as necessary for his work, but he was convicted of embezzlement and jailed for six months. In his subsequent plays he showed that Expressionism was only a phase in his career. These plays, considered the products of his artistic maturity, are more intimate and embody a deep experience of love: Oktobertag (1928; The Phantom Lover), Der Gärtner von Toulouse (1938; The Gardener of Toulouse), Alain und Elise (1940), and others.

In 1938, after the Nazis had banned his plays for their antiwar stance, Kaiser went into exile in Switzerland, where he continued his prolific output of over 60 plays until his death. His last work, published posthumously in 1948, was a mythological trilogy of verse dramas: Zweimal Amphitryon (Twice Amphityron), Pygmalion, and Bellerophon.