Her training began in Germany from the age of 16 by leading stage director Max Reinhardt. After a few years, she became recognized as a "distinguished Berlin stage actress", acting with Reinhardt's Vienna theater ensemble. Critics "raved" at her stage and film acting quality, leading MGM to sign her to a three-year contract and bring her to Hollywood in 1935. A number of filmmakers anticipated she might become another Greta Garbo, MGM's leading female star.

Her first American role was in the film Escapade (1935), which was soon followed with a relatively small part in the musical biopic The Great Ziegfeld (1936). Despite her limited appearances in the film, she "so impressed audiences" that she won the Oscar for Best Actress. For her dramatic telephone scene in the film, she was later dubbed "the Viennese teardrop". In her next role, producer Irving Thalberg was convinced, despite the studio's disagreement, that she could play the part of a poor uncomely Chinese peasant in The Good Earth, based on Pearl Buck's novel about hardship in China. The subdued character she played was such a dramatic contrast to her previous, vivacious character, that she won another Academy Award, even with Greta Garbo as one of the nominees.

However, she would later remark that by winning two consecutive Oscars, "nothing worse could have happened to me", as audience expectations from then on would be too high to fulfill. She was then given parts in a string of unimportant movies, leading MGM and Rainer to become disappointed, and she ended her brief 3-year career in films, soon returning to Europe. Adding to her rapid decline, some feel, was the "poor career advice" given her by then husband, playwright Clifford Odets, along with the unexpected death, at age 37, of her producer, Irving Thalberg, whom she greatly admired. Some film historians consider her the "most extreme case of an Oscar victim in Hollywood mythology". She currently lives in London.

The daughter of Heinz Rainer and Emmy (née Koenigsberger), Luise was born in Düsseldorf, Germany and raised in Hamburg, Germany and Vienna, Austria. She once told a reporter: "I was born into a world of destruction. The Vienna of my childhood was one of starvation, poverty and revolution." Her father was a businessman who settled in Europe after spending most of his childhood in America, where he was sent at the age of 6 as an orphan. Her mother came from an upper-class German-Jewish family.:402 A number of leading film references list her birthplace as Vienna, Austria.

Biographer Margaret Brenman-Gibson writes that Luise was a premature baby, born two months early. She also had two brothers. Rainer describes her father as being "possessive" and "tempestuous," but whose affections and concern centered on her. Luise seemed to him as "eternally absent-minded" and "very different." Rainer remembers his "tyrannical possessiveness," and was saddened to see her mother, "a beautiful pianist, and a woman of warmth and intelligence and deeply in love with her husband, suffering similarly".

Although generally shy at home, she was "immensely athletic" in school, becoming a champion runner and an "intrepid" mountain-climber, notes Brenman-Gibson. In addition to expending her energy in athletics, Rainer stated, "I became an actress only because I had quickly to find some vent for the emotion that inside of me went around and around, never stopping." It was her father's wish that she attend a good finishing school and "marry the right man," she remembers. However, her "rebellious" nature made her appear to be more a "tomboy," while at the same time, "happy to be alone", she feared she was "developing her mother's inferiority complex".

She was only six when she decided to be part of the entertainment world, and recalls being inspired by watching a circus act: "I thought that a man on the wire was marvelous, in his spangles and tights. I wanted to run away and marry him but I never had an opportunity. I am sure, though, that the experience first disclosed to me the entertainment world. For years I longed to be able to walk on a tight wire, too."

At age 16 she chose to follow her dream to become an actress. Under the pretext of visiting her mother, Rainer instead traveled to Düsseldorf and registered at the Dumont Theater, having prearranged an audition the same day. She later began studying acting with Max Reinhardt, and by the time she was 18 there was already an "army of critics" who felt that she had "unusual" talent for a young actress. She became a "distinguished Berlin stage actress" acting with Reinhardt's Vienna theater ensemble. She made her first appearance on the stage at the Dumont Theater in 1928, followed by appearances at various theaters in Jacques Deval's play Mademoiselle, Kingsley's Men in White, George Bernard Shaw's Saint Joan, Measure for Measure, and Pirandello's Six Characters in Search of an Author.

She later appeared in several German language films before being discovered in 1934 by MGM talent scout Phil Berg while performing in Six Characters in Search of an Author, who felt that she might appeal to the same audience as Greta Garbo, then one of their most successful performers. Initially, Rainer had no interest in a film career, saying in a 1935 interview: "I never wanted to film. I was only for the theater. Then I saw A Farewell to Arms and right away I wanted to film. It was so beautiful."

After doing a few films in Austria, for which "critics raved", she was offered a three-year contract with MGM and came to Hollywood in 1935 as a hopeful new star. According to biographer Charles Higham, both MGM studio head Louis B. Mayer and story editor Samuel Marx had seen footage of Rainer before she came to Hollywood, and both felt she had the looks, charm, and especially a "certain tender vulnerability" that Mayer admired in female stars.:240 Because of her weak command of English, Mayer assigned actress Constance Collier to train her in correct speech and dramatic modulation, and Rainer's speaking skills improved rapidly.