Oyama was born in Gimje, South Korea, during Japanese occupation and subsequent annexation of Korea. His parents were Yangban (nobility) in the region where he was born. At a young age he was sent to Manchuria to live on his sister's farm. Oyama began studying martial arts at age 9 from a Chinese seasonal worker who was working on the farm. His name was Lee and Oyama said he was his very first teacher. Lee gave the young Oyama a seed which he was to plant; when it sprouted, he was to jump over it one hundred times every day. As the seed grew and became a plant, Oyama later said, "I was able to jump between walls back and forth easily." However, the story of the young Oyama's life has been sensationalized in manga and movies so the line between fiction and fact has become obscure.
In March 1938, Oyama left for Japan following his brother who enrolled in the Yamanashi Aviation School Imperial Japanese Army aviation school  . He was inspired to go to Japan by General Kanji Ishihara who was against the invasion of Asian neighbors (as a consequence, he was ostracized by higher ranks of the Japanese Army), to carve out his future in the heart of the Empire of Japan.
n 1953 Oyama opened his own karate dojo, named "Oyama Dojo," in Tokyo but continued to travel around Japan and the world giving martial arts demonstrations, including the fighting and killing of live bulls with his bare hands. His dojo was first located outside in an empty lot but eventually moved into a ballet school in 1956. Oyama's own curriculum soon developed a reputation as a tough, intense, hard hitting but practical style which was finally named 'kyokushin' in a ceremony 1957. He also developed a reputation for being 'rough' with his students, often injuring them during training sessions. As the reputation of the dojo grew students were attracted to come to train there from in and outside Japan and the number of students grew. Many of the eventual senior leaders of today's various kyokushin based organisations began training in the style during this time. In 1964 Oyama moved the dojo into the building that would from then on serve as the kyokushin home dojo and world headquarters. In connection with this he also formally founded the 'International Karate Organization Kyokushinkaikan' (commonly abbreviated to IKO or IKOK) to organise the many schools that were by then teaching the kyokushin style.
After formally establishing Kyokushin-kai, Oyama directed the organization through a period of expansion. Oyama and his staff of hand-picked instructors displayed great ability in marketing the style and gaining new members. Oyama would choose an instructor to open a dojo in another town or city in Japan. The instructor would move to that town and usually demonstrate his karate skills in public places, such as at the civic gymnasium, the local police gym (where many judo students would practice), a local park, or conduct martial arts demonstrations at local festivals or school events. In this way, the instructor would soon gain a few students for his new dojo. After that, word of mouth would spread through the local area until the dojo had a dedicated core of students. Oyama also sent instructors to other countries such as the United States of America, Netherlands, England, Australia and Brazil to spread Kyokushin in the same way. Oyama also promoted Kyokushin by holding 'all-world' karate tournaments every few years in which anyone could enter from any style.