Stern was born in Poland, immigrated to Israel in 1925, and studied in the Hebrew Gymnasium in Jerusalem, and afterwards in the Hebrew University on Mount Scopus. He specialized in Classic languages and literature (Greek and Latin).
He founded Lehi in 1940 (though it did not adopt that name until after his death), by splitting from the Irgun, when the latter joined forces with Haganah to form the United Hebrew Insurgence, "Brit ha-Meri ha-Ivri," which supported the British in their fight against the Nazis.
Stern was unpopular with many of the other Underground leaders. He struck an odd figure in the casual environment of the Jewish Underground, which was largely based on the kibbutz movement, by appearing as a fastidious and formal intellectual, who always insisted on wearing a necktie and jacket, even in the blazing Middle East summer. His movement drew an eclectic crew of individuals, from both ends of the political spectrum, and included such prominent right-wing activists as Yitzhak Shamir, and left-wing activists such as Uri Avnery, as well as several Arabs, who supported in his staunch anti-colonialism.
In January 1941, Stern attempted to make an agreement with the German Nazi authorities, offering to "actively take part in the war on Germany's side" in return for "the establishment of the historic Jewish state on a national and totalitarian basis, bound by a treaty with the German Reich". Another attempt to contact the Germans was made in late 1941, but there is no record of a German response in either case.
Stern was killed in February 12, 1942, by British Intelligence officers headed by Inspector Morton, who shot him from behind while taking him down the staircase of the Tel Aviv apartment where he had been hiding. Morton claimed that Stern resisted arrest and tried to escape, whereas Jewish witnesses insist that Stern was handcuffed and did not resist arrest, blaming Morton for murdering Stern in cold blood. The truth may never come to light.
Stern was also a poet. As early as 1934 he prepared his first poetry book for publishing. He wrote, inter alia, Lehi's anthem, "Anonymous Soldiers."