Östlund was born in Styrsö, Gothenburg Municipality, Sweden. After high school, he started working in various ski resorts in the Alps during the winter seasons. While in the Alps, he began making skiing videos for his friends, which helped him obtain a job at a local production company.
He went on to study at the film school in Gothenburg, graduating in 2001. He was accepted to the school based on his skiing films. Together with film producer Erik Hemmendorff, he is the co-founder of the production company Plattform Produktion, which produces his films.
His first three feature-length fiction films were The Guitar Mongoloid (2004), Involuntary (2008) and Play (2011). The Guitar Mongoloid won the FIPRESCI Award at the 27th Moscow International Film Festival. Östlund's short film Incident by a Bank won the Golden Bear for Best Short Film at the 60th Berlin International Film Festival and the Grand Prix at Tampere Film Festival in 2011.

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