Douglas entered British comedy folklore when, during a stand-up performance at The Comedy Store, London, he was angered by the audience's reaction to his stand-up routine and shouted "You can't do this to me, I'm Kirk Douglas's son!" A member of the audience stood up and shouted "No, I'm Kirk Douglas' son," referring to the iconic "I'm Spartacus" scene of the 1960 film starring Kirk Douglas. This ended up with the majority of the audience standing up and repeating the line.

Douglas made his screen debut in 1971 in A Gunfight, starring his Father and Johnny Cash. In 1982, Douglas appeared in the NBC television film Remembrance of Love, also starring his Father. Douglas portrayed a younger version of his father's character in flashback scenes. He appeared in several films in the 1980s including The Flamingo Kid (1985), Tomboy (1985), The Golden Child (1986), and Honor Bound (1988). In the late 1980s, Douglas performed off-Broadway at the Village Gate Theater with the critically acclaimed improvisational comedy troupe Noo Yawk Tawk . He also appeared in a production of Dale Wasserman's Shakespeare and The Indians at the Music Theatre Conference for the Eugene O' Neill Theatre Center in 1981. Also in the production was folk performer Bobby Bridger, but the production never made it to Broadway.

In the early 1990s, Douglas attempted a career as a stand-up Comedian. He performed in New York City comedy clubs with much of his self-deprecating material coming from his status as the black sheep of the Douglas dynasty.

In 1991, Douglas appeared with his Father (in the senior Douglas' Emmy-nominated performance) in "Yellow", the Season 3 finale of the television series Tales from the Crypt. The Father and son acting duo portrayed Father and son characters with Eric a young officer in World War I brought up on charges of cowardice by his commanding general who is also his cold-hearted Father.

Douglas was arrested multiple times throughout the 1990s. One of his first arrests came in 1991 for kicking a Beverly Hills police officer. On October 30, 1994, Douglas was arrested in Los Angeles for cocaine possession. Less than a month later, he was arrested for DUI and for leaving the scene of an accident when he crashed into a parked car while trying to leave The Comedy Store in West Hollywood after a fight. In May 1996, Douglas was arrested for possession of a controlled substance when police found eleven vials of crack cocaine and 1,085 Xanax pills in his Hell's Kitchen, Manhattan apartment. He pleaded guilty to the charges and was placed on probation and was ordered to complete a drug rehab program.

In August 1996, he was arrested in Long Beach, California for driving under the influence of drugs and alcohol. Two days later, Douglas was arrested in New Canaan, Connecticut for disorderly conduct after he attempted to kiss a young girl who was a fellow patient at Silver Hill Hospital, a rehab facility he was in at the time. He was cleared of the charges in February 1998. In February 1997, Douglas was arrested for DUI after crashing his rental car into two parked cars.

In 2000, Douglas revealed in an interview that he went into an eight-day coma in 1999 after accidentally overdosing on Xanax. Douglas recalled, "I was in L.A. sitting around my breakfast table with my dad and I choked on a piece of sausage. But because the pills had taken effect, I was not able to dislodge the sausage from my throat." After the Douglas' maid attempted the Heimlich maneuver, Douglas was taken to Cedars-Sinai Medical Center where he fell into a coma. Due to an anoxic brain injury, his speech became slurred and his gait was altered.

In May 2001, Douglas sued his former Psychiatrist, Dr. william Leader, claiming that Leader prescribed him a combination of prescription drugs that are lethal when combined with alcohol. Douglas asserted that Leader, who had been treating Douglas for his drug addictions for ten years, failed to consider his alcohol Problem when he prescribed Vicodin, Klonopin, and Xanax. Douglas claimed the drugs caused him to feel suicidal and also caused an episode of cardiac arrest which led him to require constant care and hospitalization. Douglas sought $50,000 in damages from Leader.

On July 6, 2004, a maid found Douglas' body in his Manhattan apartment. An autopsy and toxicology report later determined that his death was caused by "acute intoxication" from the combined effects of alcohol, tranquilizers and painkillers. Douglas' death was ruled accidental. Douglas is interred in the Westwood Village Memorial Park Cemetery, Westwood, Los Angeles, California.

Weeks before his death, Douglas was back in a rehab center in upstate New York. His parents reportedly visited him and gave him a tough love ultimatum regarding his drug use. During an appearance on The Early Show in 2009, Kirk Douglas told interviewer Julie Chen that he and his wife had taken Eric to "20 rehab centers" over the years and that "nothing helped".