After he graduated from high school in 1939 in his hometown of Villach, Austria, Watzlawick studied philosophy and philology at the Università Ca' Foscari Venice and earned a doctor of philosophy degree in 1949. He then studied at the Carl Jung Institute in Zurich, where he received a degree in analytical psychotherapy in 1954. In 1957 he continued his researching career at the University of El Salvador.

In 1960, Don. D. Jackson arranged for him to come to Palo Alto to do research at the Mental Research Institute (MRI). In 1967 and thereafter he taught psychiatry at Stanford University.

At the Mental Research Institute in Palo Alto, California Watzlawick followed in the footsteps of Gregory Bateson and the research team (Don D. Jackson, John Weakland, Jay Haley) responsible for introducing what became known as the "double bind" theory of schizophrenia. Watzlawick's 1967 work based on Bateson's thinking, Pragmatics of Human Communication (with Don Jackson and Janet Beavin), became a cornerstone work of communication theory. Other scientific contributions include works on radical constructivism and most importantly his theory on communication. He was active in the field of family therapy.

Watzlawick was one of the three founding members of the Brief Therapy Center at MRI. In 1974, members of the Center published a major work on their brief approach, Change, Principles of Problem Formation and Problem Resolution (Watzlawick, Weakland, Fisch).

Watzlawick defines five (5) basic axioms in his theory on communication that are necessary to have a functioning communication between two individuals. If one of these axioms is somehow disturbed, communication might fail. All of these axioms are derived from the work of Gregory Bateson, much of which is collected in Steps to an Ecology of Mind (1972).

• One Cannot Not Communicate (Man kann nicht nicht kommunizieren): Every behaviour is a kind of communication. Because behaviour does not have a counterpart (there is no anti-behaviour), it is not possible not to communicate.

• Every communication has a content and relationship aspect such that the latter classifies the former and is therefore a metacommunication: This means that all communication includes, apart from the plain meaning of words, more information - information on how the talker wants to be understood and how he himself sees his relation to the receiver of information.

• The nature of a relationship is dependent on the punctuation of the partners communication procedures: Both the talker and the receiver of information structure the communication flow differently and therefore interpret their own behaviour during communicating as merely a reaction on the other's behaviour (i.e. every partner thinks the other one is the cause of a specific behaviour). Human communication cannot be desolved into plain causation and reaction strings, communication rather appears to be cyclic.

• Human communication involves both digital and analog modalities: Communication does not involve the merely spoken words (digital communication), but non-verbal and analog-verbal communication as well.

• Inter-human communication procedures are either symmetric or complementary, depending on whether the relationship of the partners is based on differences or parity.

Watzlawick is author of 18 books (in 85 foreign language editions) and more than 150 articles and book chapters. Books he has written or on which he has collaborated include:

• Pragmatics of Human Communication, 1967,
• Change (with John Weakland and Richard Fisch), 1974, , W W Norton page
• How Real is Real?, 1976,
• The Language of Change, 1977, , W W Norton page
• Gebrauchsanweisung für Amerika, 1978
• The Situation is Hopeless, but not Serious, 1983, , W W Norton page
• The Invented Reality: How Do We Know What We Believe We Know? (Contributions to constructivism), 1984,
• Ultra-Solutions, or, How to Fail Most Successfully, 1988,

Paul Watzlawick theory had great impact on the creation of the four sides model by Friedemann Schulz von Thun.