Arad was born Icchak Rudnicki on November 11, 1926, in what was then Święciany in the Second Polish Republic (now Švenčionys, Lithuania). In his youth, he belonged to the Zionist youth movement Ha-No'ar ha-Tsiyyoni. During the war – according to Arad's 1993 interview with Harry J. Cargas – he was active in the ghetto underground movement from 1942 to 1944. In February 1943, he joined the Soviet partisans of the Markov Brigade, a primarily non-Jewish unit in which he had to contend with antisemitism. Apart from a foray infiltrating the Vilna Ghetto in April 1943 to meet with underground leader Abba Kovner, he stayed with the Soviet partisans until the end of the war, fighting the Germans, taking part in mining trains and in ambushes around the Naroch Forest of Belarus. "The official attitude of the Soviet partisan movement was that there was no place for Jewish units" acting independently, said Arad.
Historian Mark Paul explains that Arad (then Rudnicki, aged 18), belonged to a partisan unit which was part of the Voroshilov Brigade based in the Narocz forest, involved in punitive missions against other partisan groups whom they considered as enemies. The Voroshilov brigade partisans were representing Soviet interests in the region and followed the NKVD directives in numerous actions. Noah Shneidman estimates that there were at least 300 Jewish partisans in it, one-fifth of its numerical strength. Piotr Zychowicz (Rzeczpospolita), claims that Arad joined the NKVD at the end of 1944, and became active in combating Lithuanian Liberation Army. In his interview Arad insisted that he was not associated with NKVD, thus contradicting claims of Rytas Narvydas from the Genocide and Resistance Research Center of Lithuania. He was allegedly dismissed from the NKVD ranks for his undisciplined behaviour.
In December 1945, Yitzhak Arad immigrated without authorization to Mandate Palestine, on the Ha'apala (Aliyah Bet) boat named for Hannah Szenes. In Arad's military career in the IDF, he reached the rank of brigadier general and was appointed to the post of Chief Education Officer. He retired from the military in 1972.
In his academic career as a lecturer on Jewish history at Tel Aviv University, he has researched World War II and the Holocaust, and has published extensively as author and editor, primarily in Hebrew. His current research deals with the Holocaust in the USSR. Dr. Yitzhak Arad served as the director (Chairman of the Directorate) of Yad Vashem, Israel's Holocaust Remembrance Authority, for 21 years (1972–1993). He remains associated with Yad Vashem in an advisor's capacity. Arad was awarded Doctor honoris causa degree by Poland's Nicolaus Copernicus University in Toruń on 7 June 1993.
In June 2007, Lithuania asked the State of Israel to question Arad on suspicions of war crimes and crimes against humanity. An investigation found that Arad had served in the NKVD. The Vilnius Battalion, the unit with which Arad served, has been accused of killing Lithuanian anti-communist partisans and civilians in 1943-1944, and the chief prosecutor of Lithuania suspected that Arad had been involved in these crimes, partly based on Arad’s memoir The Partisan which refers to a 1944 "mopping-up operation" against Lithuanians. Israel refused the request, and called it "nothing short of outrageous". Lithuanian prosecutor Rimvydas Valentukevicius told AFP that the suspicions were based on Arad's own memoirs and documents obtained from the state-funded Genocide and Resistance Research Centre. The Lithuanian newspaper Respublika deemed Arad's account in his autobiography an admission of "ethnic cleansing of Lithuanians," and demanded his prosecution. The head of the Genocide and Resistance Research Centre at the time, Arvydas Anusauskas, was involved in the initiation of a criminal investigation against Arad.
Arad denied accusations of committing war crimes, calling the investigation a vendetta for his documentation of atrocities committed by Lithuanian Nazi collaborators. Arad has commented: "I am proud that I fought the Nazi Germans and their Lithuanian collaborators. That fate made it possible for me to fight against the murderers of my family, the murderers of my people."
The General Prosecutor’s office dropped the criminal investigation regarding possible war crimes of Arad in September 2008, citing "failure to collect sufficient data".
He was born Icchak Rudnicki, later adopting the Hebrew surname Arad (Hebrew: ארד). During World War II, he was known as Tolya (Russian diminutive for Anatoly) in the underground and among the partisans.