Holzer was born in Vienna, Austria. His interest in the supernatural was sparked, at a young age, by stories told to him by his uncle Henry. He went on to study archaeology and ancient history at the University of Vienna but sensing that war was imminent, his family decided it was unsafe to stay in Austria and left the country for New York City in 1938. He studied Japanese at Columbia University and, after studying comparative religion and parapsychology, claimed to have obtained a Ph.D. at a school called the London College of Applied Science. He went on to teach parapsychology at the New York Institute of Technology.

His extensive involvement in researching the supernatural included investigating The Amityville Horror and some of the most prominent haunted locations around the world. He also worked with well-known trance mediums such as Ethel Johnson-Meyers, Sybil Leek, and Marisa Anderson. Holzer has been credited with creating the term "The Other Side" (already in use, however, in nineteenth century spiritualism) or in full "The Other Side of Life". He is also sometimes credited with having coined the term ghost hunter, which was the title of his first book on the paranormal published in 1963. However, an earlier book by Harry Price published in 1936 was titled Confessions of a Ghost Hunter.

Holzer believed in life after death, and the existence of ghosts, spirits, and "stay behinds": Ghosts were, according to him, imprints left in the environment which could be "picked up" by sensitive people; Spirits were intelligent beings who could interact with the living; while "stay behinds" were those who found themselves earth-bound after death. He also believed in reincarnation and the existence of "levels of consciousness". He was a vegetarian, then a vegan for most of his life.

Holzer's most famous investigation was into The Amityville Horror case. In January 1977, Holzer and spiritual medium Ethel Meyers entered 112 Ocean Avenue in Amityville, New York. Meyers claimed that the house had been built over an ancient Native American burial ground and the angry spirit of a Shinnecock Indian Chief - "Rolling Thunder" - had possessed the previous occupant, Ronald Defeo Jr., driving him to murder his family. Photographs taken at the scene revealed curious anomalies - such as the halos which appeared in the supposed images of bullet marks made in the original 1974 murders. Holzer's claim that the house was built on Indian sacred land was, however, denied by the local Amityville Historical Society and it was pointed out that it was the Montaukett Indians, and not the Shinnecocks, who had been the original settlers in the area. However, Indian burial sites have been found all over Long Island, including Amityville, so no one has been able to confirm or deny the burial of an Indian chief on or near the 112 Ocean Avenue property. Holzer went on to write several books about the subject, both fiction and non-fiction.