Oscar Hammerstein I was born in Stettin in Pomerania to a German speaking Jewish family consisting of Abraham Hammerstein and his first wife Berthe. He took up music at an early age. His mother died when he was fifteen years old, and he fled his father, who maltreated him, to seek his fortunes in the United States, arriving in New York City in 1864. He worked sweeping the floor in a cigar factory. Ten years later he founded the U.S. Tobacco Journal. He also moonlighted as a theatre manager in the downtown German theatres.

He was an innovator in the tobacco industry and invented and patented several cigar machines. He became wealthy industrializing cigar manufacturing, and his tobacco fortune provided the money needed to pursue his theater interests.

He built his first theatre, the Harlem Opera House, at 125th Street in 1889. His second theatre, the Columbus Theatre, was built in 1890 on the same street. His third theatre was the first Manhattan Opera House, built in 1893 on 34th Street. This failed as an opera house and was used, in partnership with Koster & Bial, to present variety shows.

Embittered by the partnership, he opened a fourth venue, the Olympia Theatre, on Longacre Square. Nine years later, Longacre Square was renamed Times Square, and the area had become, through his efforts, a thriving theatre district.

Hammerstein had built three more theatres there, the Victoria Theatre, a Vaudeville house, in 1899, which was managed by his son, Willie Hammerstein; the Republic Theatre, leased to eccentric producer David Belasco, in 1900, and the Lew Fields Theatre for Lew Fields (half of the Vaudeville team Weber and Fields, and the father of lyricist Dorothy Fields), in 1904.

He opened Hammerstein's Roof Garden above the Victoria and Republic Theatres.

In 1904, Hammerstein, dissatisfied with the Metropolitan Opera's productions, opened an eighth theater, his second Manhattan Opera House, to directly (and successfully) compete with it. In 1908 he opened the Metropolitan Opera House in Philadelphia, Pennsylvania.

He produced contemporary operas, and presented the American premieres of Louise, Pelleas et Melisande, Elektra, Le Jongleur de Notre Dame, Thaïs, and Salome, as well as the American debuts of Mary Garden and Luisa Tetrazzini.

His high-quality productions were ultimately too expensive to sustain, and by his fourth opera season he was going bankrupt. The costs at the Metropolitan, too, were skyrocketing, as they spent more and more in order to effectively compete. Hammerstein's son Arthur Hammerstein negotiated a payment of $1.2 million from the Metropolitan in exchange for an agreement not to produce grand opera in the United States for ten years.

With this money, Hammerstein built his tenth theatre, the London Opera House, in London, where he again entered competition with an established opera house, Covent Garden's royal opera company. He had run through his money in two years, and thereupon returned to America.

With money obtained from the vaudeville booking rights to the Victoria Theatre, he built his eleventh and final theatre, the Lexington Opera House. Unable to present opera there, he opened it as a movie theatre, selling it shortly thereafter.

At his death in 1919, with his contractual ban on presenting opera due to expire in 1920, he was busy planning his return to the opera stage.

There's also a "Hammerstein Ballroom" in New York City at the Manhattan Center Studios in honor of him.

Hammerstein had two sons, Arthur and Willie. Arthur himself continued the family business as an opera and Broadway producer, director, theatre owner and songwriter. Willie managed Oscar's Victoria Theatre, and his son, Oscar Hammerstein II was one of Broadway's most influential lyricists and bookwriters, as well as a director and producer. Oscar II's sons James and William were both producers and directors on Broadway. Arthur's daugher Elaine appeared twice on Broadway as an actress.