Born at Hamburg in Germany, Stern received his PhD in zoology from the University of Berlin in 1923. He spent two years as a postdoctoral fellow with T. H. Morgan at Columbia before being appointed Privatdozent at the University of Berlin in 1928. Stern returned to America as a refugee from Nazi Germany in 1933 and settled first at the University of Rochester, serving as professor of zoology from 1941 until 1947. He then moved to the chair of zoology and genetics at the University of California, Berkeley, from which post he retired in 1970.

Stern, in 1931, was the first geneticist actually to demonstrate the phenomenon of crossing over in the chromosomes of Drosophila. That crossing over did occur had been assumed and widely used by Morgan and his school since about 1914. It was, however, only when Stern managed to get flies with a pair of homologous chromosomes that were structurally markedly different from each other at both ends that experimental support could be produced. (Normally chromosomes that pair together are structurally identical.) Stern knew that the longer chromosome (long–long) carried the genes AB while the shorter chromosome (short–short) carried the genes A¹B¹. Cytological examination of the offspring revealed that those carrying the genes AB¹ or A¹B had long–short and short–long chromosomes respectively, showing that crossing over had indeed occurred. In the same year comparable evidence was provided by Harriett Creighton and Barbara McClintock from their work with maize.

Stern later worked on problems concerned with genetic mosaics and demonstrated that crossing over can occur in the somatic (nonreproductive) cells as well as the germ cells. He also produced the widely read textbook Principles of Human Genetics (1949).