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After graduating in media studies from the University of Tampere, Kaurismäki worked as a bricklayer, postman, and dish-washer, long before pursuing his interest in cinema, first as a critic, and later as a screenwriter & director. He started his career as a co-screenwriter and actor in films made by his older brother, Mika Kaurismäki. He played the main role in Mika's film The Liar (1981). Together they founded the production company Villealfa Filmproductions and later the Midnight Sun Film Festival. His debut as an independent director was Crime and Punishment (1983), an adaptation of Dostoyevsky's novel set in modern Helsinki. He gained worldwide attention with Leningrad Cowboys Go America (1989).

Kaurismäki's film Ariel (1988) was entered into the 16th Moscow International Film Festival where it won the Prix FIPRESCI. Kaurismäki's most acclaimed film has been The Man Without a Past, which won the Grand Prix and the Prize of the Ecumenical Jury at the 2002 Cannes Film Festival and was nominated for an Academy Award in the Best Foreign Language Film category in 2003. However, Kaurismäki refused to attend the Oscar ceremony, asserting that he did not feel like partying in a country that was in a state of war. Kaurismäki's next film, Lights in the Dusk, was also chosen to be Finland's nominee for best foreign-language film, but Kaurismäki again boycotted the awards and refused the nomination, as a protest against U.S. President George W. Bush's foreign policy. In 2002 Kaurismäki also boycotted the 40th New York Film Festival in a show of solidarity with the Iranian director Abbas Kiarostami, who was not given a US visa in time for the festival. Kaurismäki's 2017 film The Other Side of Hope won the Silver Bear for Best Director award at the 67th Berlin International Film Festival. At the same festival he also announced that it would be his last film, although the retirement was short-lived as he began filming Fallen Leaves in 2022, which premiered at the Cannes Film Festival in 2023.