At school he met W. H. Auden who became his lifelong friend. He later studied at Corpus Christi College, Cambridge, where he met Stephen Spender who was at Oxford University with Auden. Rejecting his upper-class background and attracted to boys, he moved to Berlin, the capital of the young Weimar Republic, drawn by its deserved reputation for sexual freedom. He worked as private tutor while writing the novel Mr. Norris Changes Trains and a series of short stories collected under the title Goodbye to Berlin. These provided the inspiration for the play I Am a Camera and the subsequent musical Cabaret. A memorial plaque to Isherwood has been erected on the house in Schöneberg, Berlin where he lived. In September 1931 the poet William Plomer introduced him to E.M. Forster; they became close and Forster served as a mentor to the young writer.

Auden and Isherwood travelled first to China in 1938, then emigrated to the United States in 1939. Isherwood settled in California where he embraced Hinduism. Together with Swami Prabhavananda he produced several Hindu scriptural translations, Vedanta essays, the biography Ramakrishna and his Followers, and novels, plays and screenplays, all imbued with themes and characters of Vedanta, karma, reincarnation and the Upanishadic quest.

Arriving in Hollywood in 1939, he first met Gerald Heard, the mystic-historian who founded his own monastery at Trabuco Canyon that was eventually gifted to the Vedanta Society. Through Heard, who was the first to discover Swami Prabhavananda and Vedanta, Isherwood joined an extraordinary band of mystic explorers that included Aldous Huxley, Bertrand Russell, Chris Wood, John Yale and J. Krishnamurti. Through Huxley, Isherwood befriended the Russian composer Igor Stravinsky.

Isherwood became a naturalized citizen of the United States in 1946.

From 1953 until his death, Isherwood lived with his partner, the portrait artist Don Bachardy. Isherwood died in Santa Monica, California.