Zangwill was born in London on January 21, 1864 in a family of Jewish immigrants from Czarist Russia (Moses Zangwill from what is now Latvia and Ellen Hannah Marks Zangwill from what is now Poland), he dedicated his life to championing the cause of the oppressed. Jewish emancipation, women's suffrage, assimilationism, territorialism and Zionism (understood as a national liberation movement) were all fertile fields for his pen. His brother was also a writer, the novelist Louis Zangwill, and his son was the prominent British psychologist, Oliver Zangwill.

Zangwill received his early schooling in Plymouth and Bristol. When he was nine years old Zangwill was enrolled in the Jews' Free School in Spitalfields in east London, a school for Jewish immigrant children. The school offered a strict course of both secular and religious studies while supplying clothing, food, and health care for the scholars; today one of its four houses is named Zangwill in his honour. At this school young Israel excelled and even taught part-time, moving up to become a full-fledged teacher. While teaching, he studied for his degree in 1884 from the University of London, earning a BA with triple honours.

Zangwill married Edith Ayrton, a gentile feminist and author who was the daughter of cousins Matilda Chaplin and William Edward Ayrton.

In later life, his friends included well known Victorian writers such as Jerome K. Jerome and H. G. Wells.

Zangwill wrote a very influential novel Children of the Ghetto: A Study of a Peculiar People (1892). The use of the metaphorical phrase melting pot to describe American absorption of immigrants was popularised by Zangwill's play The Melting Pot, a hit in the United States in 1908 — 1909. The play received its most recent production at New York's Metropolitan Playhouse in March 2006.

When The Melting Pot opened in Washington D.C. on October 5, 1909, President Theodore Roosevelt leaned over the edge of his box and shouted, "That's a great play, Mr. Zangwill, that's a great play." The hero of the play, David, emigrates to America in the wake of the Kishinev pogrom in which his entire family is killed. He writes a great symphony called "The Crucible" expressing his hope for a world in which all ethnicity has melted away, and falls in love with a beautiful Russian Christian immigrant named Vera. The dramatic peak of the play is the moment when David meets Vera's father, who turns out to be the Russian officer responsible for the annihilation of David's family. Vera's father admits his guilt, the symphony is performed to accolades, David and Vera live happily ever after, or, at least, agree to wed and kiss as the curtain falls.

"Melting Pot celebrated America's capacity to absorb and grow from the contributions of its immigrants." Zangwill, who had already left Zionism, was writing as "a Jew who no longer wanted to be a Jew. His real hope was for a world in which the entire lexicon of racial and religious difference is thrown away."

His simulation of Yiddish sentence structure in English aroused great interest. He also wrote mystery works, such as The Big Bow Mystery, and social satire such as The King of Schnorrers (1894), a picaresque novel. His Dreamers of the Ghetto (1898) includes essays on famous Jews such as Baruch Spinoza, Heinrich Heine and Ferdinand Lassalle. Jules Furthman adapted one of his plays for the 1931 Janet Gaynor film Merely Mary Ann, about an orphan and a composer.

The Big Bow Mystery was the first locked room murder novel. It has been almost continuously in print since 1891 and has been used as the basis for three commercial films.

Another widely-produced play was The Lens Grinder, based on the life of Spinoza.

Zangwill supported the feminist and pacifist movements, but his greatest impact may have been as a writer who popularized the idea of the melding of the races into a single, American nation. The hero of his widely-produced play, The Melting Pot, proclaims: "America is God's Crucible, the great Melting-Pot where all the races of Europe are melting and reforming... Germans and Frenchmen, Irishmen and Englishmen, Jews and Russians - into the Crucible with you all! God is making the American."'

Jewish politics

Zangwill was also involved in specifically Jewish issues.....politics as an assimilationist, an early Zionist, and a territorialist. Zangwill left the Zionist movement in 1905 to lead the Territorialist movement, advocating a Jewish homeland in whatever piece of land might be available.

Zangwill is incorrectly known for coining the slogan "A land without a people for a people without a land" describing Zionist aspirations in the Biblical land of Israel. What Zangwill actually wrote, in the New Liberal Review in December, 1901, was “Palestine is a country without a people; the Jews are a people without a country.” Zangwill, who had visited Palestine, knew that it did contain a population, although a relatively small one. What he meant by calling it a land without "a people" is that there was at that time no people or ethnic group identifying itself as any particular national group and that it was underpopulated as most travelers at the time agreed. The people then living in Palestine under the rule of the Ottoman Empire thought of themselves as Arab, Greek, Circassian, and so forth. Those identifying as Arabs identified with their cities, villages or tribe, or with the wider region of Syria, Bilad al-Sham, encompassing what are now Jordan, Syria, Lebanon, Israel and the Palestinian territories.

Zangwill, however, did not invent the phrase, he acknowledges borrowing it from Lord Shaftesbury. During the lead-up to the Crimean War in 1854, which signaled an opening for realignments in the Near East in July 1853, Shaftesbury wrote to Foreign Minister Aberdeen that Greater Syria was “a country without a nation” in need of “a nation without a country... Is there such a thing? To be sure there is, the ancient and rightful lords of the soil, the Jews!” In his diary that year he wrote “these vast and fertile regions will soon be without a ruler, without a known and acknowledged power to claim dominion. The territory must be assigned to some one or other... There is a country without a nation; and God now in his wisdom and mercy, directs us to a nation without a country.” Shaftesbury himself was echoing the sentiments of Alexander Keith, D.D.

After having for a time supported Theodor Herzl and the main Palestine-oriented Zionist movement, Zangwill, a British Jew, broke away from the established movement and founded his own organization, called the Jewish Territorialist Organization in 1905. Its aim was to create a Jewish homeland in whatever possible territory in the world could be found (and not necessarily in what today is the state of Israel). Zangwill died in 1926 in Midhurst, West Sussex after trying to create the Jewish state in such diverse places as Canada, Australia, Mesopotamia, Uganda and Cyrenaica.

"At the centennial of his birth, even some of those who recognized the continuing relevance of his efforts to define the Jew in the modern world separated the compelling nature of his struggle from the Victorianness of his writing and the insufficiency of his solutions: territorialism, universal religion, assimilation into an American 'melting pot.' As John Gross wrote in Commentary Magazine "one honors the writer, and puts aside his books." This quote appears to be directed toward his break from mainstream Zionism, which out-lived the Territorialist movement that Zangwill established.