Rauschning was born in Thorn, in the German Empire, to a Prussian officer in the province of West Prussia. He was educated in the Prussian Cadet Corps and was wounded in World War I. After the war, he settled in the area around Danzig (now Gda?sk, Poland), where he owned land. Under the Treaty of Versailles, Danzig and the surrounding area were designated a "free city" under the control of the League of Nations.

In January 1919, Rauschning began to collect reports and newspaper articles about atrocities committed by the Polish government and the so called "Westmarken-Verein" (association for the western territories) in the districts of Thorn (Toru? and Posen Pozna?, which had come under Polish control as a consequence of the treaty of Versailles.

Rauschning claimed that before World War I about 1,200,000 Germans had lived in these districts and that there only 350,000 were left in 1929; he concluded that more than 800,000 had been expelled from their homes. He claimed also that the expulsion was performed through psychological and economic pressure and by internment of thousands of people. Rauschning highlighted the city of Szczypiorno, which, he claimed, had functioned as an internment camp where 8,000 people...including seven-year-old children, seventy-year-old men, and twenty-four Lutheran clergymen (General-Superintendent Blau among them) -- were kept as prisoners for months under miserable conditions and without medical care.

During the session of the League of Nations in Lugano on December 15, 1928, German foreign minister and Nobel Laureate Gustav Stresemann directed a furious charge against Poland because of these atrocities perpetrated against its German minority.

As a wealthy landowner and agriculturist, Rauschning became President of the Farmers' Association of the Free City. At this time he became a supporter of the National Socialists (Nazis), believing that they offered the only way out of Germany's troubles, including the incorporation of Danzig into Germany. He joined the Nazi Party in 1932. He became President of the Danzig Teachers' Association in 1932. After Adolf Hitler came to power in Germany in 1933, the Nazis in Danzig won control of the Free City's government, and Rauschning became the President of the Senate of Danzig on 20 June 1933; that is, head of state of the Free City government.

The Nazis in Danzig decided to impose the same Gleichschaltung (total restructuring) that was being carried out in Germany. This included arresting Catholic priests, disenfranchising Jew, and suppressing all other political parties. But Rauschning resisted. He was a bitter rival of Albert Forster, the Gauleiter of Danzig.On 23 November 1934, he resigned from the Senate and the Party. In the April 1935 Danzig elections, he supported "constitutionalist" candidates against the Nazis. The Nazis won, and Rauschning found himself in personal danger. He sold his farming interests in 1936 and fled from Danzig to Switzerland. He moved to France in 1938 and to the United Kingdom in 1939. In 1941 Rauschning moved to the United States, and purchased a farm near Portland, Oregon, where he died in 1982.

Disillusioned with Nazism, Rauschning wrote The Revolution of Nihilism, one of the first inside stories of the Nazi movement. He wrote it in the winter of 1937-38 for his fellow Germans. He also hoped it would lead to a counter-revolution against the Nazi regime. He believed that the alternative to Nazism was the restoration of the monarchy. His book went through seventeen printings in the United States.

Rauschning's definition of Nazism:

• National Socialism is an unquestionably genuine revolutionary movement in the sense of a final achievement on a vaster scale of the mass rising dreamed of by Anarchists and Communists.