Ružička was born in Vukovar, Croatia, the son of a cooper. He graduated in chemistry from the Karlsruhe Institute of Technology, in Germany, where he became assistant to Hermann Staudinger, following him to Zurich in 1912. In 1926 he was appointed professor of organic chemistry at the University of Utrecht but in 1929 he returned to the Federal Institute of Technology at Zurich to take up a similar chair.

Beginning in 1916 Ružička worked on the chemistry of natural odorants. While investigating such compounds as musk and civet he discovered a number of ketone compounds containing large rings of carbon atoms.

From the early 1920s Ružička also worked on terpenes. By dehydrogenating the higher terpenes to give aromatic hydrocarbons he was able to determine the structure of pentacyclic triterpenes. He also corrected the formulas of the bile acids and cholesterol proposed by Adolf Windaus and Heinrich Wieland. Ružička's theory that the carbon skeleton of higher terpenes could be seen as consisting of isoprene units proved a useful hypothesis in further work.

In the 1930s Ružička moved into the field of sex hormones. In 1931 Adolf Butenandt, with whom Ružička shared the 1939 Nobel Prize for chemistry, isolated 15 milligrams of the steroid hormone androsterone from 7000 gallons of urine. Androsterone is a male hormone secreted by the adrenal gland and testis, which when released at puberty causes the development of male secondary sexual characteristics. In 1934 Ružička succeeded in synthesizing it, the first of several such triumphs.