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Born in 1838 into a samurai family of Saga Domain in Hizen. After studying Neo-Confucianism at the domain school Kodokan, he turned to Dutch and English studies. After the Meiji Restoration he entered the new government, leading modernization as judge of foreign affairs and Minister of Finance — establishing the monetary system, laying railways, and reforming the land tax. In the Political Crisis of 1881 he clashed with Ito Hirobumi by radically advocating the immediate opening of a Diet and was driven from office. The following year, 1882, he formed the Constitutional Progressive Party and simultaneously founded Tokyo Senmon Gakko — today's Waseda University — in the Waseda district of Tokyo, building it into the preeminent private school in opposition to the imperial universities under the banner of 'independence of learning' and 'the spirit of standing outside officialdom.' In 1889, during treaty revision talks, he was attacked with a bomb by a Genyosha member and lost his right leg. He later served as 8th (1898) and 17th (1914–1916) Prime Minister, forming the Okuma-Itagaki cabinet, Japan's first party cabinet. He died in 1922 at age 84; a national funeral was held at Waseda.

Bold, open-hearted, and a brilliant orator: his speeches beginning 'Gentlemen, we are…' won mass affection. He combined a disposition of trusting people to the end and entrusting much to the young with a largeness of spirit that extended courtesy even to political enemies. An indomitable optimist who did not bend under defeat, assassination attempts, or loss of power.

Waseda University grew into one of Japan's premier comprehensive universities, a great private school producing statesmen, business leaders, and writers. Its ideals of 'independence of learning' and 'the spirit of standing outside officialdom' are still handed down today. Okuma was also indispensable to Meiji Japan in establishing party politics, revising the unequal treaties, and laying the foundations of modern public finance.