Born in Berlin in Germany, Naftali joined the Social Democratic Party in 1911. He served in the German Army between 1911 and 1912, after which he started to work as a journalist on economic affairs, returning to the army for a spell in 1917–18 to fight in World War I. In 1921 he became editor of the economics department of the Frankfurter Zeitung, a post he held until 1926, when he became head of the economic research department of a trade union. In 1921 he also published a book, How to read the Economic Section of the Newspaper, which was a bestseller.
He made aliyah in 1933, initially working as a lecturer at the Technion, before becoming director general of Bank Hapoalim in 1938, a post he held until 1949. He was elected to the Knesset in 1949 on Mapai's list. After being re-elected in 1951, he was appointed Minister without Portfolio in David Ben-Gurion's government.
In June 1952 he became Minister of Agriculture, a role he held until the 1955 elections, after which he reverted to being a Minister without Portfolio. In January 1959 he became Minister of Welfare, but lost his Knesset seat and place in the cabinet in the 1959 elections.