Karl Marx's theory of alienation describes the separation and estrangement of people from their work, their wider world, their human nature, and their selves. Alienation is a consequence of the division of labour in a capitalist society, wherein a human being's life is lived as a mechanistic part of a social class.

The theoretical basis of alienation is that a worker invariably loses the ability to determine life and destiny when deprived of the right to think (conceive) of themselves as the director of their own actions; to determine the character of these actions; to define relationships with other people; and to own those items of value from goods and services, produced by their own labour. Although the worker is an autonomous, self-realised human being, as an economic entity this worker is directed to goals and diverted to activities that are dictated by the bourgeoisie—who own the means of production—in order to extract from the worker the maximum amount of surplus value in the course of business competition among industrialists.

The theory, while found throughout Marx's writings, is explored most extensively in his early works, particularly the Economic and Philosophic Manuscripts of 1844, and in his later working notes for Capital, the Grundrisse. Marx's theory draws heavily from Georg Wilhelm Friedrich Hegel, and from The Essence of Christianity (1841) by Ludwig Feuerbach. Max Stirner extended Feuerbach's analysis in The Ego and its Own (1845), claiming that even the idea of 'humanity' is itself an alienating concept. Marx and Friedrich Engels responded to these philosophical propositions in The German Ideology (1845).

In his writings from the early 1840s, Karl Marx uses the German words Entfremdung ("alienation" or "estrangement", derived from 'fremd', which means "alien") and Entäusserung ("externalisation" or "alienation", which alludes to the idea of relinquishment or surrender) to suggest an unharmonious or hostile separation between entities that naturally belong together.

The concept of alienation has two forms: "subjective" and "objective". Alienation is "subjective" when human individuals feel "estranged" or do not feel at home in the modern social world. By this account, alienation consists in an individual's experience of his or her life as meaningless, or his/herself as worthless. "Objective" alienation, by contrast, makes no reference to the beliefs or feelings of human beings. Rather, human beings are objectively alienated when they are hindered from developing their essential human capacities.

For Marx, objective alienation is the cause of subjective alienation: individuals experience their lives as lacking meaning or fulfilment because modern society does not promote the deployment of their human capacities.

Marx derives this concept from Georg Wilhelm Friedrich Hegel, whom he credits with significant insight into the basic structure of the modern social world, and how it is disfigured by alienation. Hegel's view is that, in the modern social world, objective alienation has already been vanquished, as the institutions of the rational or modern state enable individuals to fulfill themselves. Hegel believes that the family, civil society, and the political state facilitate people's actualisation, both as individuals and members of a community. Nonetheless, there still exists widespread subjective alienation, where people feel estranged from the modern social world, or do not recognise modern society as a home. Hegel's project is not to reform or change the institutions of the modern social world, but to change the way in which society is understood by its members.

Marx shares Hegel's belief that subjective alienation is widespread, but denies that the modern state enables individuals to actualise themselves. Marx instead takes widespread subjective alienation to indicate that objective alienation has not yet been overcome.