Born in Thuringen, Vorarlberg, Austria to a Scottish father, the manager of a cotton mill, and a Scottish-German mother, Douglas was educated first at Uppingham School (1881-1883) and then Karlsruhe Gymnasium (1883-1889).

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Although keenly interested in natural history, he entered the British Foreign Office (1893-1901) and was posted to St. Petersburg from 1894 to 1896. He purchased property on Capri, the Mediterranean island about which he would write eight books, and in 1898 married his cousin, Elizabeth Theobaldino FitzGibbon. They had two sons, but the marriage ended in 1904.

Faced with financial reverses in 1907, Douglas existed in near and sometimes actual poverty for almost two decades as he and later his companion, Guiseppe Orioli, lived variously in London, Paris, St. Malo, Menton, Florence, Lisbon, and London, before returning to Capri in 1946.

Douglas's first published work was an official report, The Pumice Stone Industry of the Lipari Islands (1895), which he felt contributed to the abolition of child labor, but his geographical and topographical travel books such as Siren Land (1911), about the Sorrentino peninsula, Fountain in the Sands (1912), about Tunisia, and Old Calabria (1915), first attracted attention.

His travel books show a love of landscapes, a naturalist's eye glancing over the surroundings, an ear for anecdotes about the legends and people of the land, and loose, reflective meditations. From 1912 to 1914, Douglas was the assistant editor of The English Review, probably the most important prewar literary review in England, and met D. H. Lawrence, who would later depict Douglas as James Argyle in Aaron's Rod (1922).

Douglas's London Street Games (1916) was labeled "a breathless catalogue" by one of its early reviewers and was praised for its remarkable knowledge of children. In later years, Douglas wrote several autobiographical works, including Looking Back (1933) and Late Harvest (1946).

Douglas earned epithets such as "pagan to the core" and "an unashamed connoisseur of pleasure" with South Wind (1917), his only popular success. South Wind explores the pleasures of the hedonistic life.

Set on the fictional island of Nepenthe (another depiction of Capri), South Wind tells the very loosely developed story of Thomas Heard, Bishop of Bambopo, during the season of the sirocco (south wind), which considerably affects the attitudes and behavior of the islanders. He encounters people holding various unorthodox views on moral and sexual questions, and Douglas develops the collision of opinions in "a series of Rabelaisian conversation pieces."

Douglas said his plot involved making "murder palatable to a bishop" and described the work as "the result of my craving to escape from the wearisome actualities of life." The novel stands in a tradition of such works as Samuel Johnson's Rasselas, the Marquis de Sade's Justine, Thomas Love Peacock's Nightmare Abbey, and W. H. Mallock's The New Republic.

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