Heine was born in Düsseldorf, Rhineland, today North Rhine-Westphalia, Germany, which was then occupied by France (becoming part of Prussia in 1815), into a family of Jewish background. He was called "Harry" as a child, but after his baptism in 1825 he became "Heinrich". His father was a merchant, and his mother, the daughter of a physician, was a refined and educated woman. When his father's business failed, Heine was sent to Hamburg. His wealthy banker uncle, Salomon, encouraged him to go into commerce, but his ventures in this sphere were not successful.

Failing in this attempt at business life, Heine took up law, studying at the universities of Göttingen, Bonn and Berlin, where he heard Hegel's lectures on the philosophy of history (he later wrote a short satirical poem about Hegel's philosophy "Doctrine"). During his student years he was a member in the "Verein für Kultur und Wissenschaft des Judentumes" ("Society for the Culture and Scientific Study of Judaism"), founded by his contemporary Leopold Zunz. Heine finished his studies in 1825 with a doctorate in Law.

The same year, he converted to Lutheranism. Jews were still subject to severe restrictions in many of the German states at that time. They were forbidden to enter certain professions, including an academic career in the universities, a particular ambition for Heine. As Heine said in self-justification, his conversion was "the ticket of admission into European culture". He wrote, "As Henry IV said, 'Paris is worth a mass'; I say, 'Berlin is worth the sermon'."

As a poet, Heine made his debut with Gedichte (Poems) in 1821. Heine's one-sided infatuation with his cousins Amalie and Therese later inspired him to write some of his loveliest romantic lyrics; Buch der Lieder (Book of Songs, 1827) was Heine's first comprehensive collection of verse. For example the poem "Allnächtlich im Traume" of the Buch der Lieder was set to music by Robert Schumann as well as by Felix Mendelssohn. It contains the specific ironical disillusionment which is indeed typical of Heine: (non-literal translation in verse by Hal Draper:)

In his 1821 tragedy "Almansor" Heine let the protagonist Almansor decry the burning of a Koran in a public fire in re-conquered Spain. To this Almansor’s servant Hassan replies: "This was a prelude only; where they burn books they will eventually burn people."

Starting from the mid-1820s Heine distanced himself from Romanticism by adding irony, sarcasm and satire into his poetry and making fun of the sentimental-romantic awe of nature and of figures of speech in contemporary poetry and literature. A nice example are these lines:

Heine became increasingly critical of despotism and reactionary chauvinism in Germany, of nobility and clerics but also of the narrow-mindedness of ordinary people and of the rising German form of nationalism, especially in contrast to the French and the revolution. Nevertheless, he made a point of stressing his love for his Fatherland:.

Plant the black, red, gold banner at the summit of the German idea, make it the standard of free mankind, and I will shed my dear heart’s blood for it. Rest assured, I love the Fatherland just as much as you do.

Heine unconditionally admired Napoleon for his contributions to enlightenment which, for some time, the Frenchman had installed in the occupied German areas. All of Heine's publications in Germany were subject to state censorship which, in 1827, was a direct target in one of his poems:

In 1831 Heine left Germany for France, settling in Paris for his remaining 25 years of life. In the same year he wrote the poem "Die Lorelei", the first of what were to be many melancholy reminiscences of his German homeland. It is still one of the most well known poems in the German language. "Die Lorelei" was too popular to ban completely for its Jewish authorship, so the poem was labelled as "written by unknown writer" during the Third Reich. After arriving in Paris, Heine associated with Karl Marx, also living in the city at the time, and he wrote for Marx's weekly journal Vorwärts and the Deutsch–Französische Jahrbücher (German–French Annals). Heine also sympathized with the French Saint-Simonists.

In 1832, Heine published, in French, Towards a history of philosophy and religion in Germany. "Never has a more extraordinary book sailed into the world under a more ordinary and discouraging title; yet for sheer literary panache, for bizarre anecdotes, historical snap–judgements, and sheer intellectual wit and vigour, the book has few equals."

Heine’s further work was heavily inspired by socialist ideas. German authorities banned his works and those of others who were considered to be associated with the 'Young Germany' movement in 1835. Heine, however, continued to comment on German politics and society from a distance.

During his time in Paris Heine only made two visits to Germany where his beloved mother still lived. One of these visits was in winter of 1843 and inspired him for his satirical verse-epic Deutschland. Ein Wintermärchen (Germany. A Winter's Tale), an account of his journey in which he puts his socialist vision into contrast with the grim conditions in his homeland:

The Winter's Tale was also published in the Vorwärts (Forward) in 1844

Heine became very critical of the working classes social conditions resulting from the industrial revolution. After the bloody suppression of the weaver’s revolt in Silesia he wrote the poem Weaver’s Song (Weberlied or Die Weber). Many of Heine’s poems appeared in Marx’s journals which were illegally distributed in Germany. The Weaver’s Song was explicitly banned in Germany. Friedrich Engels translated it into English and had it published in the “The New Moral World”. In spite of his friendship to Marx and Engels Heine also expressed worries about Communism. Its radicalism and materialism would destroy much of European culture that he loved and admired. In the French edition of “Lutetia” Heine wrote, one year before he died: “This confession, that the future belongs to the Communists, I made with an undertone of the greatest fear and sorrow and, oh!, this undertone by no means is a mask! Indeed, with fear and terror I imagine the time, when those dark iconoclasts come to power: with their raw fists they will batter all marble images of my beloved world of art, they will ruin all those fantastic anecdotes that the poets loved so much, they will chop down my Laurel forests and plant potatoes and, oh!, the herbs chandler will use my Book of Songs to make bags for coffee and snuff for the old women of the future – oh!, I can foresee all this and I feel deeply sorry thinking of this decline threatening my poetry and the old world order - And yet, I freely confess, the same thoughts have a magical appeal upon my soul which I cannot resist …. In my chest there are two voices in their favour which cannot be silenced …. because the first one is that of logic … and as I cannot object to the premise “that all people have the right to eat”, I must defer to all the conclusions….The second of the two compelling voices, of which I am talking, is even more powerful than the first, because it is the voice of hatred, the hatred I dedicate to this common enemy that constitutes the most distinctive contrast to communism and that will oppose the angry giant already at the first instance – I am talking about the party of the so-called advocates of nationality in Germany, about those false patriots whose love for the fatherland only exists in the shape of imbecile distaste of foreign countries and neighbouring peoples and who daily pour their bile especially on France”.

Heine also loved to satirize the utopian politics of his fellow opponents of the regime in Germany as in Atta Troll: Ein Sommernachtstraum (Atta Troll: A Midsummer Night's Dream) in 1847. In the preface to Atta Troll he comments on the risk of arrest that he faced during his clandestine return visit to Germany. Heine wrote movingly of the experience of exile in his poem In der Fremde ("Abroad"):

Heine suffered from ailments that kept him bedridden for the last eight years of his life. He died in Paris on 17 February 1856, at the age of 58. His last words were: "God will forgive me. It's his job."

It had been suggested that he suffered from multiple sclerosis or syphilis, although in 1997 it was confirmed through an analysis of the poet's hair that he had suffered from chronic lead poisoning. Heine was interred in the Paris Cimetière de Montmartre.

He was survived by his wife Augustine Crescence Mirat, whom he called Mathilde and had met and married in Paris. Augustine died in 1883 and there were no children.