Born in Bobrinsk, Belorussia, Katznelson was the son of a member of Hovevei Zion, and from childhood grew up with dreams of aliyah (moving to Israel). While in Belorussia, he was a librarian in a Hebrew- Yiddish library as well as a teacher of Hebrew literature and Jewish history. In both capacities he influenced many young people with his Zionist ideas.
In addition to his desire to settle in Israel, Katznelson was strongly imbued with the ideal of physical labor and when he arrived in Israel in 1909, he worked on farms and served on several labour councils. Together with Meir Rotberg, Katznelson helped found the consumer cooperatives for the sale of food, known as "Hamashbir." To meet with the health problems of workers, he helped initiate Kuppat Holim, the Sick Fund. (Both Hamashbir and Kuppat Holim are well-established institutions in Israel today.) After the founding of the Histadrut, the General Federation of Jewish Labour, Katznelson became the editor of the Histadrut's newspaper Davar. In this position, he made the newspaper a spiritual guide for the labour class and attracted many attentive readers.
Katznelson was deeply committed to maintaining the influence of Jewish values, even though among his fellow labour idealists he often stood alone in his views. He was one of the few voices in non-religious labor circles to press for the observance of the Sabbath and festivals, dietary laws in Histadrut kitchens, and the circumcision of children in the kibbutzim.
In 1939, when Great Britain became increasingly hostile to Jewish immigration to Palestine, Katznelson was instrumental in pressing for "illegal" immigration. Moreover, under his guidance, his disciples parachuted into Nazi-held territory to try to aid Jewish survivors. Interestingly, during World War II, Katznelson prophesied that the Jews would have to emerge from the war with a Jewish state. However, he died in 1944 before he could see his prophecy realized. Monuments to his memory were established at Bet Berl in Zofit, Oholo on Lake Kinneret and Kibbutz Be'eri.