He was born in Vienna, then Austria-Hungary. His biographies often referred to him as the scion of a noble Prussian family (and he added the "von" and sometimes styled himself as "Count von Stroheim" in order to capitalize on that story.) In fact, his father owned a hat-making factory, and young Erich was a supervisor until he emigrated to the United States prior to World War I.
He began working in movies in bit parts and as a consultant on German culture and fashion. His first film was The Country Boy, in which he was uncredited, in 1915. His first credited role was Old Heidelberg.
He began working with D. W. Griffith, with uncredited roles in Birth of a Nation and Intolerance. But his sneering Germanic demeanor began to show in such films as Sylvia of the Secret Service and The Hun Within. In The Heart of Humanity, he threw a baby out a window.
Following the war, his stereotypical character became less common in films, and he turned to writing and directing, first directing his own script for Blind Husbands in 1919. Perhaps his most famous directing job was on Greed. But his dictatorial and extreme attention to detail (including requiring that his actors wear period underwear in order to know how their characters would feel) caused him to go to war with the studios, and he received fewer directing calls.
His film Queen Kelly brought down the curtain on his own career as a director and may have shortened Gloria Swanson's as well. He was fired from the director's chair halfway through filming, and directed only two more films ever again.
Instead, he returned to acting. He is perhaps best known for La Grande Illusion and Sunset Blvd, co-starring with Swanson. He was nominated for the Academy Award for Best Supporting Actor for the movie.