Hess was born in Washington, D.C. and moved to the Philippines as a child. When his mother discovered his father's marital infidelity, she divorced her wealthy husband and returned (with Karl) to Washington. She refused alimony or child support and took a job as a telephone operator, raising her son in very modest circumstances. Karl, believing (as his mother did) that public education was a waste of time, rarely attended school; to evade truancy officers, he registered at every elementary school in town and gradually withdrew from each one, making it impossible for the authorities to know exactly where he was supposed to be. He officially dropped out at 15 and went to work for the Mutual Broadcasting System as a newswriter at the invitation of Walter Compton, a Mutual news commentator who resided in the building where Mrs. Hess operated the switchboard. Hess continued to work in the news media, and by age 18 was assistant city editor of the Washington Daily News. He was later an editor for Newsweek (from which he was fired for refusing to write President Franklin D. Roosevelt's obituary) and The Fisherman. After that, he worked for the Champion Papers and Fibre Company, where his bosses encouraged him to get involved in conservative politics for the company's benefit. In doing so he met Arizona Senator Barry Goldwater and many other prominent Republicans, thus beginning the GOP epoch of his life.

Hess enlisted in the U.S. Army in 1942, but was discharged when they discovered he had contracted malaria in the Philippines.

In his book Dear America, Hess wrote that he became an atheist because his temporary job as a coroner's assistant when he was 15 left him convinced that people were simply flesh-and-blood beings with no afterlife. Consequently, he stopped attending church (he had been a devout Roman Catholic). Years later, while on leave from Champion and working for the American Enterprise Institute (AEI), he resumed attending church because virtually all of his AEI colleagues did so. His return merely reinforced his atheism; on one Sunday morning, while enduring a service as his young son sat on his lap, Hess became disgusted with himself for exposing his child to an institution he himself had rejected.

As a speechwriter for Barry Goldwater, Hess explored ideology and politics and attracted some public interest. He was widely considered to be the author of the infamous Goldwater line, "Extremism in the defense of liberty is no vice; moderation in the pursuit of justice is no virtue," but revealed that he had encountered it in a letter from Lincoln historian Harry Jaffa and later learned it was a paraphrase of a passage from Cicero. Regardless of the line's origin, Goldwater spoke it in his acceptance speech for the Republican presidential nomination and, according to Playboy magazine, the words alienated many voters and may have cost Goldwater the election. Hess was also the primary author of the Republican Party's 1960 and 1964 platforms. He later called this his "Cold Warrior" phase.

Following the 1964 presidential campaign in which Lyndon Johnson trounced Goldwater, Hess became disillusioned with traditional politics and became more radical. He parted with the Republicans altogether after being rejected for employment with the party, beginning work as a heavy-duty welder. He publicly criticized big business, suburban American hypocrisy and the military-industrial complex. Though well beyond college age, Hess joined Students for a Democratic Society, worked with the Black Panther Party and protested the Vietnam War.

During that time, newly elected President Johnson, a Democrat who was apparently displeased with Hess for having been a Republican, ordered the Internal Revenue Service to audit him. When Hess asked if a certain deduction he had claimed was right, his auditor reportedly replied, "It doesn't matter if it's right; what matters is the law." Incensed that the auditor would see a difference between what was "right" and "law," Hess sent the IRS a copy of the Declaration of Independence with a letter saying that he would never again pay taxes. The IRS charged him with tax resistance, confiscated most of his property and put a 100% lien on his future earnings. When implementing the penalty, the IRS told Hess that he no longer would be permitted to possess money; he reminded them that without money he could not buy food and would soon die. The IRS said that was his problem, not theirs. Remarkably, Hess was never incarcerated on this matter, probably due to astute, pro bono legal representation and his status as a folk hero. He was supported financially thereafter by his wife and used barter to keep himself busy. Later, however, he expressed ambivalence about becoming America's most notorious tax resister and wrote that his act of civil disobedience could have effected dramatic reforms in tax law had 10 million or more of his fellow Americans joined him in defying the IRS.

In 1968, Richard Nixon was elected president and Barry Goldwater went to Washington as Arizona's junior senator. Hess, despite now being a member of the New Left, had recently written some speeches for Goldwater and resumed their close personal relationship; he had grown convinced that American men should not be forced into military service and urged Goldwater to submit legislation abolishing conscription. Goldwater replied, "Well, let's wait and see what Dick Nixon wants to do about that one." Hess despised Nixon almost as much as he admired Goldwater and could not tolerate the notion that Goldwater would defer to Nixon. Thus ended one of Hess's closest professional associations and significantly compromised one of his deepest friendships.

Hess began reading American anarchists largely due to the recommendations of his friend Murray Rothbard. Hess said that upon reading the works of Emma Goldman he discovered that anarchists believed everything he had hoped the Republican Party would represent, and that Goldman was the source for the best and most essential theories of Ayn Rand without any of the "crazy solipsism that Rand was so fond of."

From 1969 to 1971 Hess edited The Libertarian Forum with Rothbard.

Hess eventually put his focus on the small scale, on community. He said, “Society is: people together making culture.” He deemed two of his cardinal social principles as being “opposition to central political authority” and “concern for people as individuals.” His rejection of standard American party politics was reflected in a lecture he gave during which he said "The Democrats or liberals think that everybody is stupid and therefore they need somebody... to tell them how to behave themselves. The Republicans think everybody is lazy..."

In 1969 and 1970, Hess joined with others, including Murray Rothbard, Robert LeFevre, Dana Rohrabacher, Samuel Edward Konkin III, and former Students for a Democratic Society leader Carl Oglesby to speak at two "left-right" conferences which brought together activists from both the Old Right and the New Left in what was emerging as a nascent libertarian movement. BradSpangler.com » Blog Archive » Konkin’s History of the Libertarian Movement Hess later joined the Libertarian Party which was founded in 1971, and served as editor of its newspaper from 1986 to 1990.

Hess was an early proponent of the "back to the land" movement, and his focus on self-reliance and small communities happened in part by government mandate. According to a Libertarian Party News obituary, "When the Internal Revenue Service confiscated all his property and put a 100 percent lien on all of his future earnings, Hess (who had taught himself welding) existed on bartering his work for food and goods." LP News Jun94 - Karl Hess: 1923-1994

With Goldwater’s 1964 defeat, Hess and others on the losing team had found themselves outsiders within the national Republican party due to their support of that controversial politician. Anticipating that making a living as a speechwriter thereafter might prove a challenge, Hess had begun to learn welding. This activity put him in rapport with a very large segment of the American population who are manual laborers. He eventually came to the conviction that virtually no one in national politics identified with these people anymore. When Hess revolted against public giantism — a distrust toward large-corporate business as well as big government — his conviction prompted him to withhold federal income tax payment; legal troubles ensued, but he had welding skills (and the practice of barter) to fall back on. After Hess had made friends within the New Left and related circles, he began to encounter the young, new-breed “appropriate technology” enthusiasts (exemplified, by the late 1960s, in the editors and readerships of the Whole Earth Catalog and Mother Earth News).

In the early 1970s, Hess became involved in an experiment with several friends and colleagues to bring self-built and -managed technology into the direct service of the economic and social life of the poor, largely African American neighborhood of Adams-Morgan in Washington, D.C.. It was the neighborhood in which Hess had spent his childhood. Afterward, Hess wrote a book entitled Community Technology which told the story of this experiment and its results. According to Hess, the residents had a vigorous go at participatory democracy, and the neighborhood seemed for a time like a fertile ground for the growth of community identity and capability.

Much of the technological experimentation Hess and others engaged in there was successful in technical terms (apparatus was built, food raised, solar energy captured, etc.). For instance, Hess wrote: "In one experiment undertaken by the author and associates, an inner-city basement space, roughly thirty by fifty feet, was sufficient to house plywood tanks in which rainbow trout were produced at a cost of less than a dollar per pound. In a regular production run the total number of fish that can be raised in such a basement area was projected to be five tons per year." He taught courses and lectured on Appropriate Technology and Social Change in this period at the Institute for Social Ecology in Vermont. Nonetheless, the Adams-Morgan neighborhood, continuing on what he felt was a path of social deterioration and real-estate gentrification, declined to devote itself to expanding on the technology. Hence, in his view, a needy community got little value from the application of viable technology.

Subsequently, Hess and his wife, Therese, moved to rural Opequon Creek, West Virginia, where he set up a welding shop to support his household. He became deeply involved with local affairs there. Hess built an affordable house that relied largely on passive-solar heating, and took an interest in wind power and all forms of solar energy. By the late 1970s, he saw solar energy as emblematic of decentralization and nuclear energy as emblematic of central organization.

Hess wrote for and later edited a survivalist newsletter titled Personal Survival ("P.S.") Letter, which was published from 1977 to 1982. It was first published and edited by Mel Tappan. Following Tappan's death in 1980, Hess took over editing and publishing the newsletter, eventually renaming it Survival Tomorrow. In the same time period, Hess authored the book A Common Sense Strategy for Survivalists.

Hess ran a symbolic campaign for Governor of West Virginia in 1992. When asked by a reporter what his first act would be if elected, he quipped, "I will demand an immediate recount."

Toward Liberty is a documentary film which won the Academy Award for best short documentary in 1981, after having previously won a Student Academy Award. Another documentary prominently featuring Hess was Anarchism in America (1983).