Kotzebue's first comedy, written while he was a law student at Jena, gave him entrée into court literary circles in Weimar, but in 1781 he was forced to go into exile for a reason that is not clear. Entering government service in Russia (1783), he became president of the magistracy of the province of Estonia in 1785 and was ennobled. Some of his greatest successes—Adelheid von Wulfingen (1788), Menschenhass und Reue (1789–90; The Stranger), Die Indianer in England (1790; The Indian Exiles)—were written while he lived there. His Spanier in Peru (1796) was adapted by the English playwright Richard Brinsley Sheridan (Sheridan, Richard Brinsley) as Pizarro (1799) and also proved a great success. Kotzebue traveled abroad and spent some time writing for the municipal theatre of Vienna. Upon his return to Russia he was arrested, inexplicably, and exiled to Siberia. The emperor Paul I, just as capriciously as he had exiled Kotzebue, had him released a few months later. Kotzebue was given an estate in Livonia and made director of the German theatre in St. Petersburg.

In 1801 he returned to Weimar, but he was not on good terms with Johann Wolfgang von Goethe or with the Romantics; he went back to Russia in 1806. In 1817 he was again sent abroad by the emperor Alexander to report on current Western ideas in politics, finance, and education. Execrated by political radicals as a spy in the pay of a reactionary power, Kotzebue was assassinated by Karl Sand, a member of a radical student association. The assassin was executed and the universities placed under strict control as a result.

As a dramatist Kotzebue was prolific (he wrote more than 200 plays) and facile, but dramatically adroit. He is at his best in such comedies as Der Wildfang (1798; “The Trapping of Game”) and Die deutschen Kleinstädter (1803; “The German Small-towner”), which contain admirable pictures of provincial German life. He also wrote some novels as well as historical and autobiographical works.