Born in Mannheim, Schaaf arrived at SV Werder Bremen's youth academy in 1972, turning professional six years later. After a slow start with the first team, where he made only 21 league appearances in four years combined – 19 of them coming in 1980–81 in the second division – he eventually became an important squad member; he made his debut in the Bundesliga on 18 April 1979, in a 0–3 away loss against VfL Bochum.
On 14 December 2009, Schaaf signed a new contract with Werder Bremen. He led the side to the third place in the league and the playoff stages in the 2010–11 Champions League, as well as to a second straight German Cup final, which was lost to Bayern Munich.
Schaaf left Werder Bremen on 15 May 2013 by mutual consent after finishing a disappointing fourteenth in the domestic championship, ending 14 years in charge of the club. He oversaw 645 games as a coach during his stint, leading it to six major trophies and six appearances in the Champions League. Schaaf had been with Werder Bremen for 41 years, dating back to 1972 when he signed for the club as an 11 year old youth player. During the press conference where he announced his resignation, he spoke of his admiration of the club and the joy of his time spent at the Weserstadion, saying, "I had an extraordinary time here, connected with a lot of positive experiences and great successes. I would like to thank everyone who accompanied me along the way and supported me. I wish Werder Bremen a successful future."