He was born in Hamburg, the son of two teachers. He was educated at Hamburg Lichwark school, graduating in 1937. He was conscripted into military service and began WW II serving with Bremen air defences, after brief service on the eastern Front he returned to Germany in 1942 to work as a trainer and advisor at the Reichsluftfahrtministerium. Also in 1942 he married Hannelore "Loki" Glaser. Towards the end of the war, from December 1944 onwards, he served as an Oberleutnant in the artillery on the western Front. He was captured by the British in April 1945 in the Lüneburg Heath and was a POW until August.
He completed his education in Hamburg, studying economics and political science. In 1949 he graduated. He had joined the SPD in 1946, and from 1947-48 he was leader of the Sozialistische Deutsche Studentenbund (SDS), the then student organisation of the SPD.
On leaving university he entered local government in Hamburg, working in the department for economic policy and then from 1952, under Karl Schiller, he was a senior figure in the Behörde für Wirtschaft und Verkehr (the Hamburg State Ministry for Economy and Transport). From 1953 until 1962 he worked for the SPD on the Bundestag.
He was elected to the Bundestag in 1953, and in 1957 he became member of the SPD parlamentary party executive. He was a vocal critic of conservative government policy. In 1958 he joined the board of the SPD (Bundesvorstand) and campaigned against nuclear weapons and the equipping of the Bundeswehr with such devices. In 1958 he lost his seat.
From 1961 he was 1965 he was Minister of the Interior (Innensenator) on the Hamburg Senate. He improved his reputation with his active efforts during the 1962 flooding in the city. In 1965 he was re-elected to the Bundestag and became head of the SPD faction in 1967 and deputy chairman of the party in 1968. He had his first cabinet post in October 1969 as Defence Minister under Willy Brandt. From July 1972 to November he was Minister for Economics, and from December onwards until May 1974 Minister of Finance .
He became Bundeskanzler on May 16, 1974 after the resignation of Brandt. The worldwide economic recession was the main concern of his government, Schmidt took a tough and conservative line. He was also active in improving relations with France and Valéry Giscard d'Estaing and in 1975 he was a signatory of the Helsinki Final Act to create the OSCE. He remained chancellor after the 1976 elections in coalition with the FDP. His policy over the terrorist Rote Armee Fraktion was uncertain but he usually held to a tough, no compromise line. He tied his political future strongly to NATO expansion following the Soviet invasion of Afghanistan and tied his party firmly to the "double resolution" for the elections in 1980. He was reappointed as chancellor in November 1980. In October 1981 he was fitted with a cardiac pacemaker.
In 1982 he won a vote of no confidence in February, but in September four FDP ministers left his cabinet. After attempts to continue with a minority SPD only government he was forced to resign by a Constructive Vote of No Confidence on October 1, the first in German history to be successful. He was succeeded by Helmut Kohl.
In 1983 he joined the nationwide weekly Die Zeit newspaper as co-editor, in 1985 he became Managing Director. With Takeo Fukuda he founded the InterAction Councils in 1983. He retired from the Bundestag in 1986 but remained active, in December 1986 he was one of the founders of the committee supporting the EMU and the creation of the European Central Bank.