Schooled in Dresden and Hermannstadt, Arz graduated "with great achievement", and went on to read law at a university, during which time he volunteered for one year's service in a Hungarian Feldjäger battalion during 1876–1877.

At the outbreak of war in the Summer of 1914, Arz von Straussenburg requested a transfer to a field assignment and was again given command of the 15th infantry division,[4] which participated in the closing stages of Komarów.

In September 1915, he was promoted to the rank of General der Infanterie, and having fought alongside Mackensen's 11th army he gained the respect of the Germans in his abilities as a commander.

With the threatened entry of Romania into the war on the Allied side, Arz was reassigned from the 6th Corps and appointed to command the newly reorganised 1st Army on 16 August 1916.

A slow Romanian advance combined with hysterical outcry from Budapest led to the 1st Army being considerably and rapidly strengthened to drive back the challenge from the south.

In cooperation with the German 9th Army, the Romanian invasion was repelled and its forces were thrown back across the border within eight weeks, leading to Arz receiving the respect and appreciation of the new Austro-Hungarian emperor, Karl I.

Other commanders also hailed his achievements during the campaign, with Conrad writing that he had "proved to be an energetic resolute leader in the most difficult situations..." and Boroević stating that Arz was an "Honourable, noble character....outstanding general."

Karl I of Austria succeeded Franz Joseph as Emperor on 21 November 1916, bringing with him a wave of change across the upper echelons of the government and military command.

Promoted to the rank of Generaloberst on 26 February 1918, and also raised to the nobility early the same year, Arz was ultimately responsible for planning the invasion of Italy which was to take place during the summer of 1918, with Russia now knocked out of the war and a good number of experienced forces at his disposal.

An armistice with Italy was concluded on 3 November 1918 and was to come into effect 36 hours later, during which time thousands of Imperial troops were captured while believing themselves to be at peace, due to poor communication from Army High Command.

Moreover, he became a scapegoat by the public opinion since next to the resigned King the Chief of the General Staff was made responsible for the consequences of the armistice and the defeat of the Battle of Piave.

The newly established First Austrian Republic in spite of a new law accepted on 19 December 1918 conducted an infringement procedure against him regarding the Battle of Piave, however it ended without any result.

[6] With Transylvania and the Bukovina awarded to Romania after the war, he became a Romanian citizen but he refused to return to his home in a country in the defeat of which he had played a significant role only a few years earlier, having expected of possible retaliation.

[8] Since 1931, the Hungarian Parliament put a condition to all pensioner to be habitually residing in Budapest, in 1932, he moved officially to the city, however he did not check out from Vienna and continued to stay there recurrently.