Schröder was born in Mossenberg, in what is now North Rhine-Westphalia. His father Fritz Schröder, a lance corporal in the Wehrmacht, was killed during World War II in action in Romania on 4 October 1944, a few months after Gerhard's birth. His mother Erika worked as an agricultural laborer in order to support herself and her two sons. Schröder completed an apprenticeship in retail sales in a Lemgo hardware shop from 1958 to 1961, then worked in a retail shop in Lage and after that as an unskilled construction worker and a sales clerk in Göttingen while studying at night school to gain a high school diploma. He did not have to do military service because his father died in the war. In 1966, Schröder secured entrance to a university, passing the Abitur exam at Westfalen-Kolleg, Bielefeld. From 1966 to 1971 he studied law at the University of Göttingen. From 1972 onwards, Schröder served as an assistant at Göttingen University. In 1976, he passed his second law examination and worked as a lawyer until 1990. Among his more controversial cases, Schröder helped founding member of the Baader-Meinhof terrorist group Horst Mahler secure an early release from prison and the permission to practice law again in Germany.

Schröder joined the Social Democratic Party in 1963. In 1978 he became the federal chairman of the Young Socialists, the youth organisation of the SPD. He spoke for the dissident Bahro, as did President Jimmy Carter, Herbert Marcuse and Wolf Biermann. In 1982 he wrote an article on the idea of a red/green coalition for a book at Olle & Wolter, Berlin, which later appeared in "Die Zeit". SPD- and SI-Chairman, Chancellor Willy Brandt, who reviewed Olle & Wolter at that time, had just asked for more books on the subject. In 1980 Gerhard Schröder was elected to the German Bundestag, and wore a sweater to parliament instead of the traditional suit. He became chairman of the SPD Hanover district. In 1985, Schröder met the GDR leader Erich Honecker during a visit to East Berlin. In 1986, Schröder was elected to the parliament of Lower Saxony and became leader of the SPD group. After the SPD won the state elections in June 1990, he became Minister-President of Lower Saxony as head of an SPD-Greens coalition; in this position, he also won the 1994 and 1998 state elections. Following his election as Minister-President in 1990, Schröder became a member of the board of the federal SPD. In 1997/98 he served as President of the Bundesrat, but he left the office on 27 October, three days before his term expired, when he became Chancellor as head of an SPD/Green coalition. At the 22 September 2002 general elections, he secured another four-year term, with a narrow nine-seat majority (down from 21).

After the resignation of Oskar Lafontaine as SPD Chairman in March, 1999, in protest at Schröder's adoption of a number of what Lafontaine considered "neo-liberal" policies, Schröder took over his rival's office as well. In February, 2004, he resigned as chairman of the SPD. Franz Müntefering succeeded him as chairman. On 22 May 2005, after the SPD lost to the Christian Democrats (CDU) in North Rhine-Westphalia, Gerhard Schröder announced he would call federal elections "as soon as possible". A motion of confidence was subsequently defeated in the Bundestag on 1 July 2005 by 151 to 296 (with 148 abstaining), after Schröder urged members not to vote for his government in order to trigger new elections.

The 2005 German federal elections were held on 18 September. After the elections, neither Schröder's SPD-Green coalition nor the alliance between CDU/CSU and the FDP led by Angela Merkel achieved a majority in parliament, but the CDU/CSU had a stronger popular electoral lead by one percentage point. Since the SPD had been trailing the CDU by more than 15 points only weeks before the election, this outcome was a surprise and was mainly attributed to Schröder's charisma and prowess as a campaigner; polls consistently showed that he was much more popular with the German people than Merkel. On election night, both Schröder and Merkel claimed victory and chancellorship, but after initially ruling out a grand coalition with Merkel, Schröder and Müntefering entered negotiations with her and the CSU's Edmund Stoiber. On 10 October, it was announced that the parties had agreed to form a grand coalition. Schröder agreed to cede the chancellorship to Merkel, but the SPD would hold the majority of government posts and retain considerable control of government policy. Merkel was elected chancellor on 22 November. On 11 October, Schröder announced that he would not take a post in the new Cabinet and, in November, he confirmed that he would leave politics as soon as Merkel took office. On 23 November 2005, he resigned his Bundestag seat. Subsequently, he joined Ringier AG Ringier, the publisher of some of the leading newspapers and magazines in Switzerland and Europe, as a Zurich-based political consultant and lobbyist.

On 14 November, at the SPD conference in Karlsruhe, Schröder urged members of the SPD to support the proposed coalition, saying it "carries unmistakably, perhaps primarily, the imprint of the Social Democrats". Many SPD members had previously indicated that they supported the coalition, which would have continued the policies of Schröder's government, but had objected to Angela Merkel replacing him as Chancellor. The conference voted overwhelmingly to approve the deal.

In its first term, Schröder's government decided to phase out nuclear power, fund renewable energies, institute civil unions which enabled same-sex partners to enter into a civil union, and liberalize naturalization law. Most voters associated Schröder with the Agenda 2010 reform program, which included cuts in the social welfare system (national health insurance, unemployment payments, pensions), lowered taxes, and reformed regulations on employment and payment. After the 2002 election, the SPD steadily lost support in opinion polls. Many increasingly perceived Schröder's Third Way program to be a dismantling of the German welfare state. Moreover, Germany's high unemployment rate remained a serious problem for the government. Schröder's tax policies were also unpopular. The fact that Schröder served on the Volkswagen board (on behalf of being minister-president of Lower Saxony) and tended to prefer pro-car policies led to him being nicknamed the "Auto-Kanzler" (car chancellor).

Schröder sent forces to Kosovo and to Afghanistan as part of NATO operations. Prior to Schröder's Chancellorship, German troops had not taken part in combat actions since World War II. With Germany having a long experience with terrorism itself, Schröder declared solidarity with the United States after the September 11 terrorist attacks. When Schröder left office Germany had 2,000 troops in Afghanistan, the largest contingent from any nation other than the United States. Along with French President Jacques Chirac and many other world leaders, Schröder spoke out strongly against the 2003 invasion of Iraq and refused any military assistance in that enterprise. Schröder's stance caused political friction between the U.S. and Germany, in particular because he used this topic for his election campaign. Schröder's stance set the stage for alleged anti-American statements by members of the SPD. The parliamentary leader of the SPD, Ludwig Stiegler, compared U.S. President George W. Bush to Julius Caesar while Schröder's Minister of Justice, Herta Däubler-Gmelin, likened Bush's foreign policy to that of Adolf Hitler. Schröder's critics accused him of enhancing, and campaigning on, anti-American sentiments in Germany.

On 1 August 2004, the 60th anniversary of the 1944 Warsaw Uprising, he apologised to Poland for "the immeasurable suffering" of its people during the conflict. He was the first German chancellor to be invited to an anniversary of the uprising.

In addition to a friendly relationship with Jacques Chirac, Schröder cultivated close ties with Russian President Vladimir Putin, in an attempt to strengthen the "strategic partnership" between Berlin and Moscow, including the opening of a gas pipeline from Russian Andrew Marino-Pipelines over the Baltic Sea exclusively between Russia and Germany. Schröder was criticized in the media, and subsequently by Angela Merkel, for calling Putin a "flawless democrat" on 22 November 2004, only days before Putin prematurely congratulated Viktor Yanukovich during the Orange Revolution. Only a few days after his chancellorship, Schröder joined the board of directors of the joint venture. Thus bringing about new speculations about his prior objectivity. In his memoirs "Decisions: My Life in Politics" Schröder still defends his friend and political ally, and states that "it would be wrong to place excessive demands on Russia when it comes to the rate of domestic political reform and democratic development, or to judge it solely on the basis of the Chechnya conflict."

Schröder has criticised some European countries' swift decision to recognise Kosovo as an independent state after it declared independence in February 2008. He believes the decision was taken under heavy pressure from the U.S. government and has caused more problems, including the weakening of the so-called pro-EU forces in Serbia.

In August 2008, Schröder laid the blame for the 2008 South Ossetia war squarely on Mikhail Saakashvili and "the West", hinting at American fore-knowledge and refusing to criticize any aspect of Russian policy which had thus far come to light.

Schröder has been married four times. Schröder's four marriages have earned him the nickname "Audi Man", a reference to the four-ring symbol of Audi motorcars. Another nickname is "The Lord of the Rings". When not in Berlin, Schröder lives in Hanover. Schröder's plans after leaving office as Chancellor and resigning his Bundestag seat include resuming his law practice in Berlin and writing a book. He will also be retained by the Swiss publisher Ringier AG as a consultant. He rents an apartment in Berlin while retaining his primary residence in Hanover. As a former Chancellor, he is entitled to a permanent office, also situated in Berlin. He has also spent time improving his English language skills.