Arnautoff was the son of a Russian Orthodox priest. He showed a talent for art from an early age and hoped to study art after graduating from the gymnasium in Mariupol. With the outbreak of World War I, he enrolled in the Yelizavetgrad Cavalry School. He went on to hold military leadership positions in the army of Nicholas II and the White Siberian army. With the defeat of the Whites in Siberia, he crossed into northeastern China and surrendered his weapons. He remained in China for five years. He again tried to pursue art, but was impoverished and took a position training the cavalry of the warlord Zhang Zuolin. He met and married Lydia Blonsky and they had two sons, Michael and Vasily.
In November 1925 Arnautoff went to San Francisco on a student visa to study at the California School of Fine Arts. There he studied sculpture with Edgar Walter and painting with Gertrude Partington Albright and other instructors. His wife and children joined him and they all continued to Mexico in 1929, where, on Ralph Stackpole's recommendation, he became an assistant to the muralist Diego Rivera. Rivera and Arnautoff first worked on a series of murals at the Palace of Cortés, Cuernavaca. After starting the murals in the National Palace, Rivera went to San Francisco to paint a mural in the new Stock Exchange building, leaving Arnautoff in charge for a time. A third son, Jacob, was born in Mexico.
In 1931 the family returned to San Francisco, and Arnautoff completed his first mural commission for the Palo Alto Medical Clinic in Palo Alto (where he had been a patient) in 1932. The unveiling of this mural caused a traffic jam and some controversy, in part because the mural showed a doctor examining a female patient whose bare breasts were at eye-level. Like his other works in the Bay Area, the murals were frescoes.
In 1934 he was chosen for one of the murals to be done at Coit Tower in San Francisco, with funding from the Public Works of Art Project. He was also appointed technical director of the Coit Tower murals project. He is prominently represented there by a mural depicting San Francisco city life. This mural includes a self-portrait as well as a portrait of his son, Michael. The mural caused some controversy at the time, because the newsstand Arnautoff portrait is next to excluded the conservative San Francisco Chronicle and included left-wing newspapers. It also included other references to the "lack of concern" people show each other, including a sign for Charlie Chaplin's "City Lights", which is concerned in part with the same theme.
Arnautoff was perhaps the most prolific muralist in San Francisco in the 1930s, completing not only the murals at the Palo Alto Clinic and Coit Tower, but also at the Presidio chapel, George Washington High School (which depicted slavery and a dead Native American), and the California School of Fine Arts library. All of these murals were focused on humanist themes, including concerns about class, labor, and power. He also painted five post offices (College Station, TX; Linden, TX; Pacific Grove, CA; Richmond, CA; and South San Francisco, CA), and held solo exhibitions throughout the 1930s.
Arnautoff taught sculpture and fresco painting privately and at the California School of Fine Arts, first during summer sessions and as a regular instructor beginning in 1936. He taught art at Stanford University from 1938 to 1962, where Richard Diebenkorn was one of his students. Beginning in 1947, he also taught art courses at the California Labor School, including printmaking.
Beginning with his association with Rivera, Arnautoff's political views moved to the left, and he joined the Communist Party, as well as the American Artists' Congress and the San Francisco Artists and Writers Union. His style was generally more subtle than Rivera's and other social realists, but his politics were nevertheless reflected in his work, which has been described as being part of a mural arts movement that "hoped to inspire change through criticism of the present political system". In 1955, an Arnautoff lithograph titled "DIX McSmear," associating Vice President Richard Nixon with McCarthyism, created controversy. As a result, there were calls for Stanford to dismiss him. (The lithograph was then used as the cover for an issue of The Nation.) After he was interrogated by a HUAC subcommittee, there were again calls for Stanford to dismiss him. However, the faculty committee that reviewed his case declined to make such a recommendation to the president, and Arnautoff remained a faculty member.
Following the death of his wife in 1961, Arnautoff retired from Stanford. He returned to the Soviet Union in 1963, settling in Mariupol, Ukraine, where he had attended gymnasium. While living there, he published a memoir, and created large tile mosaics on public buildings, including a school and a communications building. He also did woodcuts for books, and had several solo exhibitions. He remarried in 1970 and died in Leningrad on March 22, 1979.Fresco murals, Roth Building, Palo Alto,1932
Peacetime Activities of the Army fresco mural, Presidio Chapel, San Francisco, CA, 1935 
Exterior reliefs  and fresco murals , George Washington High School, San Francisco, CA
Urban Life mural, Coit Tower, San Francisco, CA 
Lovers' Point oil on canvas post office mural, Pacific Grove, CA 
The Last Crop post office mural, Linden, TX, 1938 
Richmond Industrial City oil on canvas post office mural, Richmond, CA
South San Francisco, Past and Present oil on canvas post office mural, South San Francisco, CA 1941 
Post Office and School No. 54, Mariopol, Ukraine