He devoted himself to writing poetry and to translating from European languages. He promoted the study of English (to balance the German predominance in the Balkans) and was among the first with Dr. Jovan Andrejević-Joles (1833–1864) to begin the systematic translation of Shakespeare into Serbian.Laza Kostić was born in Kovilj, Vojvodina (then part of the Austro-Hungarian Empire) in 1841, of a military family. In his youth he was converted to the principles of social justice and Serbian independence in particular, and threw himself with great energy into political agitation. In 1864 he graduated from the Law School of the University of Budapest, and two years later he successfully defended his doctoral thesis in jurisprudence. After completing his studies, he occupied several positions and was very active in cultural and political life in Novi Sad, Belgrade, and Montenegro. He was among the leaders of Ujedinjena omladina srpska (United Serbian Youth) and was elected a Serbian representative to the Hungarian parliament, thanks to Svetozar Miletić, his mentor. Because of his liberal and nationalistic views he had to leave that Hungarian-occupied part of Serbia, but after several years in Belgrade and Montenegro he returned home. He died in Vienna in 1910. From 1869 to 1872 he was the president of Novi Sad's Court House, and virtually the leader of his party in his county; he was a delegate several times in the clerico-secular Sabor at Sremski Karlovci. He was Lord Mayor of Novi Sad twice, and also twice a Sajkasi delegate to the Parliament in Budapest.

After Svetozar Miletić and Jovan Jovanović Zmaj, perhaps the most active leader in Novi Sad was Laza Kostić, whose politics were some distance away from those of his associates but who was convinced that his mission to save Serbia through art had been baulked by obscuranist courtiers. In 1867, the Austrian Empire was transformed into Austria-Hungary, with the Kingdom of Hungary becoming one of two autonomous parts of the new state. This was followed by a policy of Hungarization of the non-Hungarian nationalities, most notably promotion of the Hungarian-language and suppression of Romanian and Slavic languages (including Serbian). As the chief defender of the United Serbian Youth movement, he was especially active in securing the repeal of certain unjust laws imposed on his and other nationalities in the vast Austro-Hungarian Empire. When Mihailo Obrenović III, Prince of Serbia, was assassinated, the Austro-Hungarian authorities (headed by Kalman Tisza) sought to falsely implicate Laza, his mentor Miletić, and other Serbian intellectuals in the murder plot. Though arrested and incarcerated, Kostić, like the rest of them, was eventually set free. The new Prince of Serbia was Milan IV Obrenović, a boy of fourteen who had fallen in love with Laza's most recent work—Maksim Crnojević—released that year (1868; though it was written five years earlier). Milan's great mission in life, he had already decided, was to save from a life of misery and suffering the poet whose work he and others adored. In 1872, Milan IV of Serbia was declared of age, and he took the government into his own hands. Almost Milan's first act as monarch was to send for Kostić, "that great Serbian poet and activist for Serbian rights in Austria-Hungary." At the time, Laza, back in Novi Sad after making a vitriolic speech against the Habsburgs at Milan's inauguration in Belgrade, was put back in prison by the same authorities as before. The accusations laid against him—high treason—came to naught and he was eventually freed. With more false accusations pending against him, Laza decided it was time to seek refuge in Belgrade.

Until 1895 Laza was left to live as best as he could. He was utterly convinced that he was in the world to write verse and prose and defend Serbian rights and that any other activity was a betrayal of his mission. Making his home in Belgrade, he became a popular figure there as a poet, but Serbia had other plans for him. In Belgrade, through Milan's influence Laza obtained the position of editor of Srpsku nezavisnost (Serbian Independence), an influential political and literary magazine. Milan, however, was careful to balance the Austrian and Russian parties in Serbia, with judicious leaning towards Austria-Hungary at first. At the end of the Russo-Turkish War, 1877–1878, Milan induced the Porte to acknowledge his country's independence at the Treaty of Berlin. Laza, let it be known, that he identified himself with the more moderate and opportunistic section of the Liberal party, decisively dissociating himself from the doctrine of a sudden and violent overthrow of society, and urging his associates to cooperate in bringing about a gradual development towards an independent state. In 1878 Milan chose him to be Jovan Ristić's principal assistant at the Congress of Berlin. In having Ristić as his chief adviser Milan was most fortunate, and but for that statesman's astounding diplomatic genius the liberation of Serbia would have been impossible. And in 1880 Kostić was sent to Petrovgrad as a member of the Serbian Legation there. The following years Milan devoted himself to his duties as a constitutional king with great conscientiousness by restoring the shattered finances of Serbia, reorganizing the army and modernizing the antiquated institutions of the young kingdom. But soon, Belgrade's opposition parties began taking issue with Kostić's writings. Laza Kostić had made Belgrade too hot to hold him. He had boasted of his power over the King in jest, but had disdain to make influential friends at court, so that King Milan in 1883, had to ask him to leave Belgrade for a time. Despite his great exaggerated bizarreness, Laza Kostić was ranked a great poet and writer just the same. Soon after, he took up residence in Cetinje, and the post of editor-in-chief of Glas Crnogoraca (The Montenegrin Voice), where he met like-minded intellectuals, Simo Matavulj, Pavle Rovinski, and Valtazar Bogišić. It was to him that was chiefly due the great success of the Liberals in older Serbian provinces. In 1890, Laza came to live in Sombor where he married Julijana Palanački in September 1895, and spent the rest of his life there. It was in Sombor that he wrote the hallucinatory night book, Dnevnik anova (Diary of Dreams), and the ever popular poem Santa Maria della Salute, which is considered the finest example of his love poems and elegies. He died on 27 November 1910 in Vienna while on a visit.