Yang Kaihui was born in the small village of Bancang in Changsha, Hunan Province, on November 6, 1901. Her name meant "Opening Wisdom", although she came to be nicknamed Xia, meaning "Little Dawn." Her Father was Yang Changji, a school Teacher and leftist intellectual, while her mother was Yang Zhenxi, while she had a brother three years older than her, Yang Kaizhi. Through his teaching of ethics at the First Normal School of Changsha, Changji had become a Father figure to a pupil named Mao Zedong, later writing in his journal that "it is truly difficult to imagine someone so intelligent and handsome" as him. A friendship developing, in summer 1916, Mao was invited to spend several days at Yang's Bancang home, walking twenty miles in straw sandals in order to get there. On this occasion, he did not talk to either Zhenxi or Kaizhi, instead bowing his head to them as a mark of respect.

Yang Changji gained a job in Peking, moving his family to the city. Mao arrived in Peking on August 19, 1918 with several like-minded friends from Hunan; upon arrival, they stayed in the Yang's small house in the north of the city. Here, Mao met Kaihui again, with the two discovering a mutual attraction. A friend who knew Kaihui at the time described her as "small in stature and round-faced, with deep-set eyes and pale white skin", and her appearance impressed both Mao and his friends. Kaihui later related that she had "fallen madly in love with him already when I heard about his numerous accomplishments" but did not make her feelings immediately known. She kept "hoping and dreaming" that he shared her feelings and decided that she would never marry anyone but him.

Yang joined the Chinese Socialism Youth League in the second half of 1920 as one of the first members in Hunan. She married Mao Zedong that winter, without any wedding ceremony or other celebrations. Yang joined the Communist Party of China (CPC) in the beginning of 1922. In April 1923, Mao went to the CPC's Central Committee in Shanghai to work as the Organization Department Minister. In the following year, Yang Kaihui, together with her two children, Mao Anying and Mao Anqing, joined her husband in Shanghai and organized an evening school at a cotton mill. In 1925, accompanied by Mao, Yang Kaihui went to Shaoshan to organize peasant movements, while caring for her husband and educating their children. At the same time, she continued to teach peasant evening schools and contracted with other comrades. In the beginning of 1927, Mao inspected the peasant movement in Hunan. Yang Kaihui sorted through the large amount of investigation materials and neatly copied them down. Mao’s report on the peasant movement in Hunan, including Yang's contributions, was published in March of that year. During this period Yang organized many movements among peasants, labor, women, and students.

In August 1927, Mao ended his marriage with Yang; and, in early 1928, he began a relationship with He Zizhen.

Yang was executed in Changsha on November 14, 1930 at the age of 29 and is one of the earliest Maoist martyrs. Her son, Mao Anying, who died twenty years later in the Korean War, was forced to watch his mother being shot.

Although he would have relationships with other women, Mao mourned Kaihui for the rest of his life. In summer 1937, he conversed with the American reporter Agnes Smedley, reciting to her a poem that he had written in memory of Kaihui.

In spring 1957, Li Shuyi, a friend and comrade of Mao and Yang's, wrote a poem in memory of her own husband, Liu Chih-hsün, a member of the Red Army who had been killed in 1933. Sending her poem to Mao, he responded by composing his own poem commemorating both Liu and Kaihui, titled "The Immortals", which he would subsequently publish:

After the National Revolution failed, Yang returned alone to Bancang to organize underground revolutions and lead fights against the Kuomintang (KMT) in Changsha, Pingjiang, and the borders of Xiangyin. Amid the great difficulties and dangers, Yang wrote many letters to her cousin Yang Kaiming, asking him to take good care of her children and mother if she met a sudden death. Because of the great distance and spare communication with Mao over the next three years, Yang often only saw news about her husband in the KMT’s newspapers and worried greatly about his safety.