Karl Kautsky, born in Prague of an artistic and middle class Jewish family, his parents were Johann Kautsky (a scenic designer) and Minna (an actress and writer). The family moved to Vienna when Kautsky was the age of seven. He studied history, philosophy and economics at the University of Vienna from 1874, and became a member of the Social Democratic Party of Austria (SPÖ) in 1875. In 1880 he joined a group of German socialists in Zürich who were supported financially by Karl Höchberg, and who smuggled socialist material into the Reich at the time of the Anti-Socialist Laws (1878–1890). Influenced by Eduard Bernstein, Karl Höchberg's secretary, he became a Marxist and in 1881 visited Marx and Engels in England.
In 1883, Kautsky founded the monthly Die Neue Zeit ("The New Times") in Stuttgart, which became a weekly in 1890. He edited the magazine until September 1917: this gave him a steady income and allowed him to propagate Marxism. From 1885 to 1890 he spent time in London, where he became a close friend of Friedrich Engels. His position as a prominent Marxist theorist was assured in 1888, when Engels put him to the task of editing Marx's three-volume work Theories of Surplus Value. In 1891 he co-authored the Erfurt Program of the Social Democratic Party of Germany (SPD) together with August Bebel and Eduard Bernstein.
Following the death of Engels in 1895, Kautsky became one of the most important and influential theoreticians of Marxism, representing the mainstream of the party together with August Bebel, and outlining a Marxist theory of imperialism. When Bernstein attacked the traditional Marxist position of the necessity for revolution in the late 1890s, Kautsky denounced him, arguing that Bernstein's emphasis on the ethical foundations of Socialism opened the road to a call for an alliance with the "progressive" bourgeoisie and a non-class approach.
In 1914, when the German Social-Democrat deputies in the Reichstag voted for war credits, Kautsky (who was not a deputy but attended their meetings) suggested abstaining. Kautsky claimed that Germany was waging a defensive war against the threat of Czarist Russia. However, in June 1915, about ten months after the war had begun and when it had become obvious that this was going to be a sustained, appallingly brutal and costly struggle, he issued an appeal with Eduard Bernstein and Hugo Haase against the pro-war leaders of the SPD and denounced the German government's annexationist aims. In 1917 he left the SPD for the Independent Social Democratic Party of Germany (USPD), which united Socialists who opposed the war.