In 1876 he founded in Romania what is generally credited as the world's first professional Yiddish-language theater troupe. He was also responsible for the first Hebrew-language play performed in the United States. The Avram Goldfaden Festival of Iaşi, Romania, is named and held in his honour.
Jacob Sternberg called him "the Prince Charming who woke up the lethargic Romanian Jewish culture." Israil Bercovici wrote of his works: "we find points in common with what we now call 'total theater'. In many of his plays he alternates prose and verse, pantomime and dance, moments of acrobatics and some of jonglerie, and even of spiritualism..."
Goldfaden was born in Starokonstantinov (Russia; present day Ukraine). His birthdate is sometimes given as July 12, following the "Old Style" calendar in use at that time in the Russian Empire. He attended a Jewish religious school (a cheder), but his middle-class family was strongly associated with the Haskalah, or Jewish Enlightenment, and his father, a watchmaker, arranged that he receive private lessons in German and Russian. As a child, he is said to have appreciated and imitated the performances of wedding jesters and Brody singers to the degree that he acquired the nickname Avromele Badkhen, "Abie the Jester." In 1857 he began studies at the government-run rabbinical school at Zhytomyr, from which he emerged in 1866 as a teacher and a poet (with some experience in amateur theater), but he never led a congregation.
Goldfaden's first published poem was called "Progress"; his New York Times obituary described it as "a plea for Zionism years before that movement developed." In 1865 he published his first book of poetry, Tzitzim u-Ferahim (in Hebrew); The Jewish Encyclopedia (1901–1906) says that "Goldfaden's Hebrew poetry ... possesses considerable merit, but it has been eclipsed by his Yiddish poetry, which, for strength of expression and for depth of true Jewish feeling, remains unrivaled." The first book of verse in Yiddish was published in 1866, and in 1867 he took a job teaching in Simferopol.
A year later, he moved on to Odessa (in Ukraine). He lived initially in his uncle's house, where a cousin who was a good pianist helped him set some of his poems to music. In Odessa, Goldfaden renewed his acquaintance with fellow Yiddish-language writer Yitzkhok Yoel Linetzky, whom he knew from Zhytomyr and met Hebrew-language poet Eliahu Mordechai Werbel (whose daughter Paulina would become Goldfaden's wife) and published poems in the newspaper Kol-Mevaser. He also wrote his first two plays, Die Tzwei Sheines (The Two Neighbors) and Die Murneh Sosfeh (Aunt Susie), included with some verses in a modestly successful 1869 book Die Yidene (The Jewish Woman), which went through three editions in three years. At this time, he and Paulina were living mainly on his meagre teacher's salary of 18 rubles a year, supplemented by giving private lessons and taking a job as a cashier in a hat shop.