Born in St. Petersburg, he was the son of a Russian navy officer who died in the Russo-Japanese war. Auer's family scattered during the Bolshevik revolution, forcing the 12-year-old Mischa to beg, borrow and steal to survive. Orphaned during a typhus epidemic, Auer moved to New York where he lived with his maternal grandfather, violinist Leopold Auer. Inspired by his grandfather to become a musician, he entered the Ethical Culture School in New York, where he developed an interest in acting.

Playing small parts on Broadway and with Eva LeGallienne's company, Auer persisted until his roles increased in size and importance. While appearing with the Bertha Kalich Company in Los Angeles, Auer was hired by Hollywood director Frank Tuttle for a minor role in the Esther Ralston comedy “Something Always Happens” (1927). During his first nine years in films, the tall, foreboding Auer was typecast as sinister foreigners, often playing villainous Hindu priests, Arab chieftains and feverish anarchists. He appeared in several small and mostly uncredited roles into the 1930s, appearing in such films as Rasputin and the Empress, Viva Villa! and The Lives of a Bengal Lancer.

His comic gifts were finally tapped by improvisational director Gregory La Cava, who cast Auer as society matron Alice Brady's free-loading protegé in “My Man Godfrey” (1936) for which he was nominated for the Academy Award for Best Supporting Actor.

From then on, he was regularly cast in zany comedy roles. Auer is at his zenith in such roles as the ballet instructor, Kolenkov, in the Best Picture-winning You Can't Take It With You (wherein he instructs Jean Arthur with the line, "Ah, my little Rubishka!") and the prince turned fashion designer in Walter Wanger's Vogues of 1938. Auer can also be seen cavorting in such films as: 100 Men and a Girl, Destry Rides Again, Spring Parade, Hellzapoppin', Cracked Nuts and Lady in the Dark. He was also one of the large cast of And Then There Were None.

During the 1940s, Auer starred in the radio series ‘Mischa the Magnificent’ and headlined several Broadway flops. The following decade, he spent most of his time in Europe, playing aging oddballs in films like Orson Welles' “Mister Arkadin” (1955). He also appeared on several episodic television series, like Westinghouse Desilu Playhouse, Studio One, Broadway Television Theatre and The Chevrolet Tele-Theatre. In the 1960s, he made several films in France and Italy.

Among Mischa Auer's last professional engagements was a 1964-1965 revival of ‘The Merry Widow’ - one of his few successful stage ventures. Contrary to his irascible screen image, in reality Auer was a quiet, scholarly man who spoke Russian, English, Italian, German, French and Spanish, and was married 4 times.

Mischa Auer died in Rome from cardiovascular disease.