In January 1920 Lasker and José Raúl Capablanca signed an agreement to play a World Championship match in 1921, noting that Capablanca was not free to play in 1920. Because of the delay Lasker insisted on a final clause that: allowed him to play anyone else for the championship in 1920; nullified the contract with Capablanca if Lasker lost a title match in 1920; and stipulated that if Lasker resigned the title Capablanca should become World Champion. Lasker had previously included in his agreement before World War I to play Akiba Rubinstein for the title a similar clause that if he resigned the title, it should become Rubinstein's.

A report in the American Chess Bulletin (July–August 1920 issue) said that Lasker had resigned the world title in favor of Capablanca because the conditions of the match were unpopular in the chess world. The American Chess Bulletin speculated that the conditions were not sufficiently unpopular to warrant resignation of the title, and that Lasker's real concern was that there was not enough financial backing to justify his devoting nine months to the match. When Lasker resigned the title in favor of Capablanca he was unaware that enthusiasts in Havana had just raised $20,000 to fund the match provided it was played there. When Capablanca learned of Lasker's resignation he went to Holland, where Lasker was living at the time, to inform him that Havana would finance the match. In August 1920 Lasker agreed to play in Havana, but insisted that he was the challenger as Capablanca was now the champion. Capablanca signed an agreement that accepted this point, and soon afterwards published a letter confirming this. Lasker also stated that, if he beat Capablanca, he would resign the title so that younger masters could compete for it.

The match was played in March–April 1921. After four draws, the fifth game saw Lasker blunder with Black in an equal ending. Capablanca's solid style allowed him to easily draw the next four games, without taking any risks. In the tenth game, Lasker as White played a position with an isolated queen pawn but failed to create the necessary activity and Capablanca reached a superior ending, which he duly won. The eleventh and fourteenth games were also won by Capablanca, and Lasker resigned the match.

Reuben Fine and Harry Golombek attributed this to Lasker's being in mysteriously poor form. On the other hand Vladimir Kramnik thought that Lasker played quite well and the match was an "even and fascinating fight" until Lasker blundered in the last game, and explained that Capablanca was twenty years younger, a slightly stronger player, and had more recent competitive practice.

By this time Lasker was nearly 53 years old, and he never played another serious match; his only other match was a short exhibition against Frank James Marshall in 1940, which he won. After winning the New York 1924 chess tournament (1½ points ahead of Capablanca) and finishing second at Moscow in 1925 (1½ points behind Efim Bogoljubow, ½ point ahead of Capablanca), he effectively retired from serious chess.

During the Moscow 1925 chess tournament, Emanuel Lasker received a telegram informing him that the drama written by himself and his brother Berthold, Vom Menschen die Geschichte ("History of Mankind"), had been accepted for performance at the Lessing theatre in Berlin. Emanuel Lasker was so distracted by this news that he lost badly to Carlos Torre the same day. The play, however, was not a success.

In 1926 Lasker wrote Lehrbuch des Schachspiels, which he re-wrote in English in 1927 as Lasker's Manual of Chess. He also wrote books on other games of mental skill: Encyclopedia of Games (1929) and Das verständige Kartenspiel (means "Sensible Card Play"; 1929; English translation in the same year), both of which posed a problem in the mathematical analysis of card games; Brettspiele der Völker ("Board Games of the Nations"; 1931), which includes 30 pages about Go and a section about a game he had invented in 1911, Lasca; and Das Bridgespiel ("The Game of Bridge"; 1931). Lasker became an expert bridge player, representing Germany at international events in the early 1930s, and a registered teacher of the Culbertson system.

In October 1928 Emanuel Lasker's brother Berthold died.

In spring 1933 Adolf Hitler started a campaign of discrimination and intimidation against Jews, depriving them of their property and citizenship. Lasker and his wife Martha, who were both Jewish, were forced to leave Germany in the same year. After a short stay in England, in 1935 they were invited to live in the USSR by Nikolai Krylenko, the Commissar of Justice who was responsible for the Moscow show trials and, in his other capacity as Sports Minister, was an enthusiastic supporter of chess. In the USSR, Lasker renounced his German citizenship and received Soviet citizenship. He took permanent residence in Moscow, and was given a post at Moscow's Institute for Mathematics and a post of trainer of the USSR national team. Lasker returned to competitive chess to make some money, finishing fifth in Zürich 1934 and third in Moscow 1935 (undefeated, ½ point behind Mikhail Botvinnik and Salo Flohr; ahead of Capablanca, Rudolf Spielmann and several Soviet masters), sixth in Moscow 1936 and seventh equal in Nottingham 1936. His performance in Moscow 1935 at age 66 was hailed as "a biological miracle."