Gottschalk was born in New Orleans to a Jewish businessman from London and a Creole mother. He had six brothers and sisters, five of whom were half-siblings by his father's biracial mistress. His family lived for a time in a tiny cottage at Royal and Esplanade in the Vieux Carré. Louis later moved in with relatives at 518 Conti Street; his maternal grandmother Bruslé and his nurse Sally had both been born in Saint-Domingue (known later as Haiti). He was therefore exposed to a variety of musical traditions, and played the piano from an early age. He was soon recognized as a Prodigy by the New Orleans bourgeois establishment, making his informal public debut in 1840 at the new St. Charles Hotel.
After Gottschalk returned to the United States in 1853, he traveled extensively; a sojourn in Cuba during 1854 was the beginning of a series of trips to Central and South America. Gottschalk also traveled to Puerto Rico after his Havana debut and at the start of his West Indian period. He was quite taken with the music he heard on the island, so much so that he composed a work, probably in 1857, entitled Souvenir de Porto Rico; Marche des gibaros, Op. 31 (RO250). "Gibaros" refers to the jíbaros, or Puerto Rican peasantry, and is an antiquated way of writing this name. The theme of the composition is a march tune which may be based on a Puerto Rican folk song form.
By the 1860s, Gottschalk had established himself as the best known Pianist in the New World. Although born and reared in New Orleans, he was a supporter of the Union cause during the American Civil War. He returned to his native city only occasionally for concerts, but he always introduced himself as a New Orleans native.
In May 1865, he was mentioned in a San Francisco newspaper as having "travelled 95,000 miles by rail and given 1,000 concerts". However, he was forced to leave the United States later that year because of a scandalous affair with a student at the Oakland Female Seminary in Oakland, California. He never returned to the United States.
Three weeks later, on December 18, 1869, at the age of 40, he died at his hotel in Tijuca, Rio de Janeiro, probably from an overdose of quinine. (According to an essay by Jeremy Nicholas for the booklet accompanying the recording "Gottschalk Piano Music" performed by Philip Martin on the Hyperion label, "He died ... of empyema, the result of a ruptured abscess in the abdomen.")
In 1870, his remains were returned to the United States and were interred at the Green-Wood Cemetery in Brooklyn, New York. His burial spot was originally marked by a magnificent marble monument, topped by an "Angel of Music" statue, which was irreparably damaged by vandals in 1959. In October 2012, after nearly fifteen years of fund raising by the Green-Wood Cemetery, a new "Angel of Music" statue, created by Sculptors Giancarlo Biagi and Jill Burkee to replace the damaged one, was unveiled.
His grand-nephew Louis Ferdinand Gottschalk was a notable Composer of silent film and musical theatre scores. His nephew Alfred Louis Moreau Gottschalk was U.S Consul in Peru, Mexico, and Brazil in the early 20th Century and one of the passengers who perished in the disappearance of the USS Cyclops in 1918.
Author Howard Breslin wrote a historical novel about Gottschalk titled Concert Grand in 1963.