Born at Stevenage in Hertfordshire, England, he worked as an actor in the company of Sir Henry Irving, but became more interested in art, learning to carve wood under the tuition of James Pryde and William Nicholson. His acting career ended in 1897, when he went into theatrical design.
Craig was more successful abroad than in the UK, one of his first major productions being Hamlet at the Moscow Arts Theatre in Russia in 1912. He had a relationship with Isadora Duncan, and in 1906 settled in Italy, where he eventually founded a school of theatrical design, with support from Lord Howard de Walden. His influence on the development of stage design was considerable. He received the OBE and in 1958 was made a Companion of Honour.