In 1848, von Gudden earned his doctorate from the University of Halle and became an intern at the asylum in Siegburg under Carl Wigand Maximilian Jacobi (1775–1858).

Gudden made many contributions in the field of neuroanatomy, especially in his work of mapping and describing the paths, connections, origins/termini and neuroanatomical centers of cranial and optic nerve networks.

Among his well-known students and assistants are Emil Kraepelin (1856–1926), Franz Nissl (1860–1919), Auguste-Henri Forel (1848–1931), Sigbert Josef Maria Ganser (1853–1931) and Oskar Panizza (1853–1921).

Gudden was a respected psychiatrist in Germany and was appointed personal physician to King Ludwig II of Bavaria.

On June 13, 1886, Ludwig and Gudden were both found dead in the water near the shore of Lake Starnberg at 11:30 p.m., allegedly drowned, possibly murdered.