Born in Leipzig, he was the son of Wilhelm Liebknecht, one of the founders of the Social Democratic Party of Germany. However, Karl Liebknecht was more radical than his father; he became an exponent of Marxist ideas during his study of law and political economy in Leipzig and Berlin, and after serving with the Imperial Pioneer Guards in Potsdam from 1893 to 1894 and internships in Arnsberg and Paderborn from 1894 to 1898, he earned his doctorate in 1897 and moved to Berlin in 1899 where he opened a lawyer's office with his brother, Theodor Liebknecht.
As a lawyer, Karl Liebknecht often defended other left-wing socialists who were tried for offences such as smuggling of socialist propoganda into Russia, a task in which he was involved himself as well. He became a member of the SPD in 1900 and was president of the international socialist youth from 1907 to 1910; Liebknecht also wrote extensively against militarism, and one of his papers, "Militarismus und Antimilitarismus" ("militarism and antimilitarism") led to him being arrested in 1907 and imprisoned for eighteen months in Glatz, Silesia.
In 1912 Liebknecht was elected to the Reichstag as a Social-Democrat, despite being one a member of the SPD's left wing; he opposed Germany's participation in World War I and was a major critic of the more moderate Social-Democratic leadership under Karl Kautsky. Later in the year, he also married his second wife, art historian Sophie Ryss.
At the end of 1914, Liebknecht, together with Rosa Luxemburg, Leo Jogiches, Paul Levi, Ernest Meyer, Franz Mehring and Clara Zetkin formed the so-called Spartakusbund ("Spartacus League", also often translated as "Spartacist League"); the league publicizied its views in a newspaper titled Spartakusbriefe ("Spartacus Letters") which was soon declared illegal, and Liebknecht was arrested and sent to the eastern front during World War I for the group's echoing of Russian Bolsheviks' arguments for a Proletarian Revolution; refusing to fight, he served burying the dead, and due to his rapidly deteriorating health was allowed to return to Germany in October 1915.
Liebknecht was arrested again following a demonstration against the war in Berlin on May 1st 1916 that was organized by the Spartacus League, and sentenced to two and a half years in jail for high treason, which was later increased to four years and one month; however, he was released again in October 1918, when Max von Baden granted an amnesty to all political prisoners. After his release, Liebknecht carried on his activities in the Spartacist League; he resumed leadership of the group together with Rosa Luxemburg and published its party organ, the Rote Fahne ("red flag").
On November 9, Liebknecht declared the forming of the "freie sozialistische Republik" (free socialist republic) from a balcony of the Berlin castle, two hours after Philipp Scheidemann's declaration of the "German republic" from a balcony of the Reichstag; on December 31 1918 / January 1 1919, he was involved in the founding of the KPD.
Together with Rosa Luxemburg, Leo Jogiches and Clara Zetkin, Liebknecht was also instrumental in the January 1919 Spartacist uprising in Berlin, which was brutally opposed by the new German government under Friedrich Ebert with the help of the German Army and the Freikorps; by January 13, the rising had been extinguished, and Liebknecht, together with Rosa Luxemburg, was abducted by Freikorps soldiers, brought to the Eden Hotel in Berlin and tortured and interrogated for several hours before being executed on January 15, 1919.