Heckscher was born in Stockholm, son of the Jewish Danish-born businessman Isidor Heckscher and his spouse Rosa Meyer, and completed his secondary education there in 1897. He studied at Uppsala University and Gothenburg University, completing his PhD in Uppsala in 1907. He was professor of Political economy and Statistics at the Stockholm School of Economics from 1909 until 1919, when he exchanged that chair for a research professorship in economic history, finally retiring as emeritus professor in 1945. In 1929 Heckscher founded the Institute for Economic History Research.

According to a bibliography published in 1950, Heckscher had, as of the previous year, published 1148 books and articles, among which may be mentioned his study of Mercantilism, which had been translated into several languages, and a monumental Economic history of Sweden in several volumes. Heckscher is best known for a model explaining patterns in international trade (Heckscher-Ohlin model) that he developed with Bertil Ohlin at the Stockholm School of Economics.

Eli Heckscher's son was Gunnar Heckscher (1909-1987), a political scientist and the leader of what would later become the Swedish Moderate Party 1961–1965. His grandson is the Social Democratic politician Sten Heckscher.