Wassermann, who was born at Bamberg in Germany, was educated at the universities of Erlangen, Vienna, Munich, and Strasbourg, where he graduated in 1888. From 1890 he worked under Robert Koch at the Institute for Infectious Diseases in Berlin, becoming head of the department of therapeutics and serum research in 1907. In 1913 he moved to the Kaiser Wilhelm Institute, where he served as director of experimental therapeutics until his death.

Wassermann is best remembered for the Wassermann test (or reaction), which he introduced in 1906 for the diagnosis of syphilis. The test depends upon an infected person producing in his or her blood the antibody to syphilis, which will combine with known antigens, such as beef liver or heart, to form a complex. The test is regarded as positive by the ability of the complex to fix complement, the serum protein discovered by Jules Bordet in the 1880s. The test is still widely used as a diagnostic tool.