Theodosius was born in 401 as the only son of Emperor Arcadius and his Frankish born wife Aelia Eudoxia. In 408, his father died and the seven year old boy became Emperor of the Eastern parts of the Roman Empire.

Government was at first by the Praetorian Prefect Anthemius, under whose supervision the Theodosian land walls of Constantinople were constructed. In 414, Theodosius' older sister Pulcheria was proclaimed Augusta and assumed the regency. By 416 Theodosius was capable of ruling himself, but his sister remained a strong influence on him. In June 421, Theodosius married Aelia Eudocia, a woman of Greek origin. The two had a daughter named Licinia Eudoxia.

Theodosius' increasing interest in Christianity, fueled by the influence of Pulcheria, had him start a war against the Sassanids (421 – 422), who were persecuting Christians; the war ended in a draw, when the Romans were forced to accept peace as the Huns menaced Constantinople.

In 423, the Western Emperor Honorius, Theodosius' uncle, died and the primicerius notariorum Joannes was proclaimed Emperor. Honorius' sister Galla Placidia and her young son Valentinian fled to Constantinople to seek Eastern assistance and after some deliberation in 424 Theodosius opened the war against Joannes. In May 425, Valentinian III was installed as Emperor of the West, with his mother acting as regent. To strengthen the ties between the two parts of the Empire, Theodosius' daughter Licinia Eudoxia was betrothed to Valentinian.

In 425, Theodosius founded the University of Constantinople with 31 chairs (15 in Latin and 16 in Greek). Among subjects were law, philosophy, medicine, arithmetic, geometry, astronomy, music and rhetoric.

In 429, Theodosius appointed a commission to collect all of the laws since the reign of Constantine I, and create a fully formalized system of law. This plan was left unfinished, but the work of a second commission that met in Constantinople, assigned to collect all of the general legislations and bring them up to date was completed, and their collection published as the Codex Theodosianus in 438. The law code of Theodosius II, summarizing edicts promulgated since Constantine, formed a basis for the law code of Emperor Justinian I in the following century.

The Eastern Empire was also plagued by short raiding attacks by the Huns. The Huns arrived at Athyra (Büyükçekmece) in 447, but an agreement was reached with the Eastern Roman Empire, negotiated by Anatolius. The Emperor chose to pay tribute which amounted to 350 Roman pounds (ca. 114.5 kg) of gold until 435 and 700 Roman pounds after that.

When Roman Africa fell to the Vandals in 439, both Eastern and Western Emperors sent forces to Sicily, to launch an attack at the Vandals at Carthage, but this project failed. Seeing the imperial borders without significant forces, the Huns and Sassanid Persia declared war. During 443 two Roman armies were defeated and destroyed by the Huns. In the subsequent peace agreement Roman tribute was tripled to 2,100 Roman pounds (ca. 687 kg) in gold after which the Huns withdrew into the interior of their empire. The war with Persia on the other hand proved indecisive, and a peace was arranged in 422 without changes to the status quo.

During a visit to Syria, Theodosius met the preacher Nestorius and appointed him Patriarch of Constantinople in 428. Nestorius quickly became involved in the disputes of two theological factions, which differed in their Christology. Nestorius tried to find a middle ground between those that, emphasizing the fact that in Christ God had been born as a man, insisted on calling the Virgin Mary Theotokos ("birth-giver of God"), and those that rejected that title because God as an eternal being could not have been born. Nestorius suggested the title Christotokos ("birth-giver to Christ"), but did not find acceptance by either faction and was accused of detaching Christ's divine and human natures from each other, a heresy later called Nestorianism. Though initially supported by the Emperor, Nestorius found a forceful opponent in Patriarch Cyril of Alexandria. With the consent of the Emperor and Pope Celestine I, an Ecumenical Council convened in Ephesus in 431, which affirmed the title Theotokos and condemned Nestorius, who was then exiled by the Emperor.

Almost twenty years later, the theological dispute broke out again, this time caused by the Constantinopolitan abbot Eutyches, whose Christology was understood by some to mingle Christ's divine and human nature into one. Eutyches was condemned by Patriarch Flavian of Constantinople but found a powerful friend in Cyril's successor Dioscurus of Alexandria. Another council convoked to Ephesus in 449, deemed "robber synod" because of its tumultuous circumstances, restored Eutyches and deposed Flavian, who was mistreated and died shortly afterwards. Pope Leo I of Rome and many other bishops protested against the outcome, but the Emperor supported it. Only after his death in 450 would the decisions be reversed at the Council of Chalcedon.

Theodosius died in 450 as the result of a riding accident. In the ensuing power struggle, his sister Pulcheria, who had recently returned to court, won out against the eunuch Chrysaphius. She married the general Marcian, thereby making him Emperor.