Hornbostel was born in Vienna into a musical family. He studied the piano, harmony and counterpoint as a child, but his PhD at the University of Vienna was in chemistry. He moved to Berlin, where he fell under the influence of Carl Stumpf and worked with him on musical psychology and psychoacoustics. He was Stumpf's assistant at the Berlin Psychological Institute, and when the archives of the Institute were used as the basis for the Berlin Phonogramm-Archiv, he became its first director. It was during his time there that he worked with Curt Sachs to produce the Sachs-Hornbostel system of musical instrument classification.
In 1933, he was sacked from all his posts by the Nazi Party because his mother was a Jew. He moved first to Switzerland, then the United States, and finally to Cambridge in England, where he worked on an archive of non-European folk music recordings. He died there in 1935.
Hornbostel did much work in the field of ethnomusicology. He specialised particularly in African and Asian music, making many recordings of it, and developing a system which allowed one to transcribe non-Western music from recordings to paper. He saw the musical tunings used by various cultural groups as an essential element in determining their music's character, and did much work in comparing different tunings. A lot of this work has been critized since, but in its time, this was a very rarely explored area. Hornbostel also argued that music should be a part of more general anthropological research.