Hammerstein came from strong theatrical stock, his grandfather, Oscar Hammerstein I built the Hammerstein Ballroom as the Manhattan Opera House, and his father, William Hammerstein, managed the Victoria Theater for Oscar I.
Hammerstein attended Columbia University, graduating, and then attending Columbia Law School which he quit in 1917 for theatrical pursuits.
Hammerstein collaborated for 20 years with Otto Harbach, opening his first musical on Broadway, Always You in 1921. During this period he also collaborated with others, and created a number of notable works including, Show Boat, and Sweet Adeline.
In 1943, the first production of what would be Hammerstein's most famous collaboration, with Richard Rogers, opened, Oklahoma! The two would eventually collaborate on other classics of musical theater such as Carosel, The King and I, The Sound of Music, and South Pacific. They would also produce these and other shows on Broadway.
On August 23, 1960, Hammerstein died as a result of stomach cancer, at his Doylestown, PA home, at 65 years old, just after The Sound of Music opened on Broadway. The lights in Times Square were turned off for one minute, and in the West End of London, the lights were dimmed in recognition of Hammerstein's revolution of musical theater. His ashes were interred in Ferncliff Cemetary in Hartsdale, New York.