Arnold was the born as the eldest child and only son of Count Eberwin III of Bentheim-Steinfurt (elder line) and his wife, Countess Anna of Tecklenburg-Schwerin.

He was planning to visit the French court in Paris after completing his Grand Tour but during his journey he received word that there was a turmoil.

He held the counties of Bentheim, Tecklenburg, Steinfurt, Limburg an der Lenne, the Lordship of Rheda, possessions on the Lower Rhine and bailiff rights in the Archbishopric of Cologne.

During his reign, Arnold had to cope with a lawsuit brought by the Counts of Solms-Braunfels about the inheritance of the County of Tecklenburg.

Between 1588 and 1593, Arnold III gradually introduced the Reformed doctrine of John Calvin and Huldrych Zwingli in his territories.