The couple raised their children to follow the Catholic faith. John was successful enough to own his own woolen mill but their fortunes changed dramatically in 1869, when it burned down and he suffered a serious injury. The family became nomadic as Dreiser's father looked for work during the national economic depression of the early 1870s. The constant moving made Theodore's education erratic at best. He would begin a school and three months later be pulled out, only to repeat the process in the next town he moved to. The brief education he did have came in Catholic parochial schools. The strictness he encountered there bred in him a severe abhorrence to the religion. As a result, Dreiser's real education came from self study of books.

At the age of 16, Dreiser left home and worked at odd jobs until he came across a former teacher, Mildred Fielding, in Chicago. She paid for him to attend one year at Indiana University in Bloomington (1889-90).

While working for O. S. Marden's Success, he interviewed celebrities like Andrew Carnegie, Thomas Edison, Marshall Field, William Dean Howells, and Philip Armour. For other magazines, he wrote articles on a variety of subjects that included America's fruit growing industry, the meatpacking business in Chicago, modern art, and the photography of Alfred Stieglitz.

During this time, Dreiser's experiments with poetry and fiction led him to write a short story about a lynching he had witnessed. "Nigger Jeff" was published in a small monthly journal called Ainslee.

In 1893, Dreiser was sent by the Globe to cover the Columbia Exposition, and while there he became acquainted with a local school teacher, Sara White. In 1898, they were married and Sara encouraged him to write his first novel, Sister Carrie (1900). The novel is based partly on the scandalous behavior of his sister, Emma, who had an affair with a married man who embezzled funds from his employer. It tells the story of a young country girl who moves to the urban city of Chicago, and falls into a life of degradation.

Even though the book was a critical success, it was a commercial failure because the publishers cowed in the face of social pressures against the immoral character of the heroine in the book. Dreiser went into a decline after the problems encountered in publishing his first novel. His marriage to Sara began to come apart and it was not until 1904, that he again took up literary work. To make ends meet he edited a magazine in New York and then a decade later, in 1910, he wrote his second novel, Jennie Gerhardt (1911).

Jennie Gerhardt was the story of a young woman (again based on the life of one of his sisters, Mame) who was seduced by the town Senator. She becomes pregnant, has a child, and lives a life of poverty while never telling anyone who the father was in order to protect the Senator's career. With its publication, he began a decade and a half of literary productivity which included fourteen books of fiction, plays, autobiography, travel writing, sketches, and philosophical essays.

In 1912, he published The Financier. In this work, he shifts his earlier attention on female protagonists to a male protagonist, Frank Cowperwood. Dreiser decided that he needed a trilogy to explore this figure, and it came to be called "The Trilogy of Desire." The second book was The Titan (1914), but Dreiser had difficulty completing the third book and was still working on the final chapter of The Stoic when he died in 1945.

In 1947, thirty-three years after The Titan, the final volume was published. The novel's emphasis from the material to the spiritual is generally viewed as evidence of Dreiser's decline while at the same time the trilogy is considered to be among the finest American historical novels. The Stoic reflected his late interest in Hinduism, which, like his earlier attraction to Quakerism, centered on the mystical element in its system of belief. The book was published with an appendix by Helen Dreiser that outlined the novelist's plans for the ending.

In 1919, he met Helen Patges Richardson, whose grandmother was a sister of Dreiser's mother. She was a young and beautiful actress. They had a twenty-five year relationship that survived periods of separation, estrangement, and his affairs.

Dreiser and Richardson left New York in 1938, and permanently settled in California. In 1942, Dreiser's wife, Sara died, and Dreiser married Richardson in 1944.

As a champion of public causes in the last two decades of his life, he had always prided himself on being what he called "radically American," which for him had included his freedom to defend the rights of speech of socialists, anarchists, and other radical groups who had criticized American capitalism. Dreiser joined many American intellectuals whose idealization of the Soviet Union was stimulated by the economic breakdown and social malaise of the Depression years.

In 1944, he traveled to New York to receive the Award of Merit from the American Academy of Arts and Letters.