He was born to Boghos Derounian and Eliza Aprahamian in Dedeagach, Ottoman Empire (today Alexandroupoli, Greece), and spent part of his childhood in Turkey and Sofia, Bulgaria, where his brother Steven Derounian (who later became a Republican Representative) was born. His family, fleeing the Balkan Wars, eventually settled in Mineola, New York. He went on to study at New York University's School of Journalism. Later, he married Marie Nazarian, and had a daughter, Elyse, and a son, Robert.

He died of a heart attack on April 23, 1991 at the library of the American Jewish Committee on East 56th Street.

Derounian was a tireless investigator of subversive activity, and claimed to have joined numerous "patriotic" groups, some of which he listed in the opening of his book Under Cover: National Socialist White People's Party , German American Bund, Christian Front, The Ultra-American, Nationalist Party, American Nationalist Party, American Women Against Communism, The Gray Shirts, America First Committee, No Foreign War Committee, Christian Mobilizers, American Destiny Party, American Brotherhood of Christians Congress, The Ethiopian Pacific Movement, Citizens Protective League, Social Justice Distributors Club, The American Defense Society, Anglo-Saxon Federation of America, Paul Revere Sentinels, Ra-Con Klub, Crusaders for Americanism, Inc., We the Fathers (Auxiliary to We the Mothers Mobilize for America), The Christian Mobilizer, Phalanx, PAX , National Workers League, Yankee Freemen, Cross and the Flag, Committee of One Million, Flanders Hall, American Patriots, American Bulletin, National Gentile League.

Among the groups he also helped expose was the international Nazi propaganda news agency World-Service.

He was also the chief investigator of the anti-fascist organization, Friends of Democracy.

Several parties instituted actions against him for alleged libelous matter in Under Cover. Three of the four cases failed the consolidated case before the jury, leaving a verdict in favor only of lawyer Jeremiah Stokes, whose appearance Derounian had allegedly mocked. Stokes is first mentioned on page 365 of Under Cover, and his patriotism questioned in the next chapter, which begins:

I was in the room alone with two men. The one who had pumped both my hands in welcome was a small round man with a bald dome and rotund face. He had small, beady eyes and he peered at you from behind rimmed glasses He was definitely of the single-track, uncompromising zealot type. Jeremiah Stokes had let his law practice slide and was devoting the major portion of his time to the writing of "patriotic" tracts.

Derounian appealed; the appellate court reversed the district court and remanded the matter, stating in the overview:

The court found error in the submission to the jury of a physical description of the individual as small and rotund in stature, bald, round of face, and having small and beady eyes. The description of the individual was not reasonably calculated to subject him to public ridicule. It was error to submit to the jury ridicule of personal appearance as an element of damages.