A native of Remagen, Germany, Caracciola discovered a love for automobiles at an early age, and became an apprentice at the Farnir auto works in Dresden. After World War I, he became a salesman for Farnir, and began racing their cars to promote sales. He fell in love with speed, and tried to gain the attention of the factory-backed teams at Mercedes-Benz and elsewhere. He won his first race in 1923 in a 4-cylinder car at Berlin Stadium.

     Caracciola began driving for Mercedes in some of their less significant races, but in 1926 he got his big break. With the factory team in Spain for an important race, there was no one to enter the initial German Grand Prix. He talked Mercedes into loaning him a car, and went on to win in a driving rain. He joined the factory team soon after After winning several races over the next four years, Caracciola was out of a job when the Depression forced Mercedes to suspend their racing operation. He bought his own car with the last of his savings, and won the Irish Grand Prix.