Born in Haiti to a Haitian mother and a German father, Gaetjens's great-grandfather Thomas, a native of Bremen, had been sent to Haiti by Frederick William III, the King of Prussia, as a business emissary. The family was quite prosperous, and although by the time of Joe's birth their wealth had decreased significantly, they were still among the Haitian elite. When Gaetjens was born, his father even registered the birth certificate with the German embassy, in case Joe ever wanted to gain German citizenship.

Gaetjens joined Etoile Haïtienne at the age of 14 and won two Ligue Haïtienne championships in 1942 and 1944. However, he could not make a living from professional soccer, so he went to New York City in the late 1940s to study accounting at Columbia University on a scholarship from the Haitian government. While there he played for Brookhattan of the American Soccer League, winning the league's scoring title. His success for the team attracted the attention of U.S. Soccer, and Gaetjens made the national team for the 1950 World Cup.

Gaetjens played three games at the World Cup, but easily the most memorable was one of the greatest World Cup upsets in history, in which Gaetjens scored the decisive goal of a 1–0 victory in which the American soccer team defeated the hugely favored English at Belo Horizonte. Walter Bahr had taken a shot from about 25 yards away and the ball was heading to goalkeeper Bert Williams's right. It appeared to be a relatively easy save, but Gaetjens dove headlong and grazed the ball enough that it went to the goalkeeper's left instead, with his momentum preventing him from stopping the ball. Williams later considered the goal to be a result of a lucky deflection, but this view was disputed by Laurie Hughes, who was defending Gaetjens on the play.

Although Gaetjens was not a U.S. citizen, he had declared his intention of becoming one, and under the rules of the United States Soccer Football Association at that time was allowed to play. However, Gaetjens never actually did gain American citizenship. At the end of the World Cup, Gaetjens moved to France where he played briefly for Racing Club de Paris and Olympique Alès, before returning to Haiti in 1954 to become a spokesman and entrepreneur. Gaetjens remained active in soccer, playing for Etoile Haïtienne again as well as the Haiti national team on December 27, 1953, in a World Cup Qualifier against Mexico.

Gaetjens was not interested in politics, but his family was. He was related to Louis Déjoie (his great-grandfather Thomas married Leonie Déjoie), who lost the 1957 Haitian presidential election to François "Papa Doc" Duvalier, and although the family also had connections to the new president, Gaetjens's younger brothers became associated with a group of exiles in the Dominican Republic who wanted to stage a coup.

On July 8, 1964, the morning after Duvalier declared himself "president for life", the rest of the Gaetjens family fled the country, but Joe stayed, thinking that Duvalier's regime would be uninterested in him since he was only a sports figure. That morning, he was arrested by the nation's notorious Tonton Macoutes secret police and is presumed to have been killed some time that month. His body has never been found. Joe Gaetjens was posthumously inducted into the United States National Soccer Hall of Fame in 1976.

Gaetjens is interpreted by Jimmy Jean-Louis in the film The Game of Their Lives. In the film, he is depicted as a practitioner of Vodou (voodoo), but in reality Gaetjens, like most Haitians, grew up as a Catholic.