Arseniev was born in St. Petersburg, Russia. His father, born a serf, became the chief of the Moscow District Railway. After a military education, Arseniev began his expeditions to the forests of the Far East. He lived in Vladivostok through the years of the Russian Civil War and was a Commissar for Ethnic Minorities (Komisar po delam inrodcheskim) of the independent Far Eastern Republic. After the Far Eastern Republic was absorbed by Soviet Russia in 1922 Arsenyev refused to emigrate and stayed in Vladivostok .

Arseniev is most famous for authoring many books about his explorations, including some 60 works on the geography, wildlife and ethnography of the regions he traveled. Arseniev's most famous book, Dersu Uzala, is the author's memoirs of three expeditions in the Ussurian taiga, or forest, of Northern Asia along the Sea of Japan and North to Vladivostok. The book is named after Arseniev's guide, an Ussurian native of the Nanai/Goldi tribe. Eventually the book was made into two films, one by Soviet director Agasi Babayan in 1961, the other by Japanese filmmaker Akira Kurosawa in 1975. The latter Dersu Uzala version won that year's Oscar for Best Foreign-Language Film. The third book of Arsenyev's trilogy, In the Sikhote-Alin mountains was published posthumously, only in 1937.

Arseniev died at the age of 57 in 1930. His widow, Margarita Nikolaevna Arsenieva was arrested in 1934 and again in 1937 after being accused of being a member of an underground organization of spies and saboteurs allegedly headed by her late husband. The military court hearings of the case (21 August 1938) took only 10 minutes and sentenced her to death. She was executed immediately. Arsenyev's daughter Natalya also was arrested in April 1941 and sentenced to the Gulag

Arsenyev’s family home in Vladivostok has been made into a museum. Arsenyev, a town located in Primorsky Krai, was named after him.