Zweig was born in Glogau, Silesia (today Glogow, Poland) son of a Jewish saddler. After attending a gymnasium in Kattowitz (Katowice), he made extensive studies in history, philosophy and literature at several universities - Breslau (Wrocław), Munich, Berlin, Göttingen, Rostock and Tübingen. He was especially influenced by Friedrich Nietzsche's philosophy. His first literary works Novellen um Claudia (1913) and Ritualmord in Ungarn gained him wider recognition.
Zweig volunteered for the German army in World War I and saw action as a private in France, Hungary and Serbia. He was stationed in the Western Front at the time when Judenzählung (the Jewish census) was administered in the German army. Shaken by the experience, he wrote in his letter dated February 15, 1917 to Martin Buber: "The Judenzählung was a reflection of unheard sadness for Germany's sin and our agony... If there was no antisemitism in the army, the unbearable call to duty would be almost easy." He began to revise his views on the war and to realize that it pitted Jews against Jews. Later he described his experiences in the short story Judenzählung vor Verdun. The war changed Zweig from a Prussian patriot to an eager pacifist.
By the end of the war he was assigned to the Press department of the German Army Headquarters in Kaunas and there he was first introduced to the East European Jewish organisations.
In a quite literal effort to put a face to the hated 'Ostjude' (Eastern European Jew), due to their Orthodox, economically depressed, "unenlightened," "un-German" ways, Zweig published with the artist Hermann Struck Das ostjüdische Antlitz (The Face of East European Jewry) in 1920. This was a blatant effort to at least gain sympathy among German Jews for the plight of their eastern European brethren. With the help of many simple sketches of faces, Zweig supplied interpretations and meaning behind them.
After World War I he was an active socialistic Zionist in Germany. After Hitler's attempted coup in 1923 Zweig went to Berlin and worked there as the editor-in-chief of a newspaper Jüdische Rundschau.
In the 1920s, Zweig became attracted to the psychoanalytical theories of Sigmund Freud and underwent Freudian therapy himself. In March 1927 Zweig wrote to Freud asking permission to dedicate his new book to Freud. In the letter Zweig told Freud: "I personally owe to your psychological therapy the restoration of my whole personality, the discovery that I was suffering from a neurosis and finally the curing of this neurosis by your method of treatment."
Freud returned this ardent letter with a warm letter of his own, and the Freud-Zweig correspondence continued for a dozen years - momentous years in Germany's history. This correspondence is extensive and interesting enough to have been published in book form.
In 1927 Zweig published the anti-war novel The Case of Sergeant Grischa, which made him an international literary figure. From 1929 he was a contributing journalist of anti-Nazi newspaper Die Weltbühne (World Stage).
When the Nazis took power in Germany in 1933, Zweig was one of many Jews who immediately went into voluntary exile. Zweig went first to Czechoslovakia, then Switzerland and France. After spending some time with Thomas Mann, Lion Feuchtwanger, Anna Seghers and Bertolt Brecht in France he set out for Palestine.
His 1947 book The Axe of Wandsbek concerned the 'Altona Bloody Sunday' ('Altonaer Blutsonntag') riot, an SA march on 17 July 1932 that turned violent and led to 18 people being shot dead , with four Communists including Bruno Tesch subsequently being beheaded for their alleged involvement .
In 1948, after a formal invitation from the East German government, Zweig decided to return to the Soviet Zone (later called the GDR). In East Germany he was in many ways involved in the communist system. He was a member of parliament, delegate to the World Peace Council Congresses and the cultural advisory board of the communist party. He was President of the German Academy of the Arts from 1950-53.
After 1962, due to poor health, Zweig virtually withdrew from the political and artistic fields. Arnold Zweig died in East Berlin on 26 November 1968.