Born in Indianapolis, Indiana, to Elbert L. Pauley and the former Ellen Van Petten, he attended Occidental College, in northeast Los Angeles, during 1919 and 1920 before transferring to the University of California, Berkeley, where he was a member of Phi Kappa Psi fraternity, earning a Bachelor of Science in 1922 and a Master of Science the following year.

When Truman tried to appoint him Under Secretary of the Navy in 1946, Secretary of the Interior Harold L. Ickes resigned in protest, claiming that while Pauley was treasurer of the Democratic National Committee, he had suggested to Ickes that $300,000 ($5.19 million in 2025 dollars) in campaign funds could be raised if the Interior Department would drop its fight against the State of California for ownership of oil-rich offshore lands.

[9] By the 1960s, Pauley came to support Ronald Reagan, and was by far the Board of Regents' harshest critic of UC Berkeley student protesters.

[10] In 1965, Pauley was serving as a regent at the University of California, when anti-Vietnam war campus protests began to grow.

As soon as McCone left his office, Hoover phoned Los Angeles FBI chief Wesley Grapp, and ordered him to give Pauley anonymous memos on regents, faculty members, and students who were "causing trouble at Berkeley".

[12][13] (This information was not made public until 2002, after a fifteen-year legal battle with the FBI that went all the way to the US Supreme Court, as a result of a FOIA request for an in-depth San Francisco Chronicle investigation.

Pauley explained that the 24-member Board of Regents was divided and that his faction wanted "strong positive action taken immediately to clean up the mess.

After Pauley promised not to reveal that the FBI was his source, Grapp gave him a report on UC Berkeley immunology professor Leon Wofsy that summarized news stories from 1945 to 1956, noting that Wofsy had been a self-avowed Communist Party official who tried to get young people involved with the party.

[15] On February 4, 1965, Grapp told Hoover that Pauley could be used as a source on internal University affairs, and could harass and remove suspected communists on the faculty and the Board of Regents.

As Pauley saw it, according to Grapp's report, UC would remain in turmoil "as long as the current officials were in power at the university.

[16] Grapp continued to slip Pauley anonymous memos about students and faculty—at least two dozen more—that he could use in persuading the regents to fire Kerr.

When Ronald Reagan was elected California's governor in 1966, after campaigning against "campus malcontents and filthy speech advocates" at Berkeley, one of his first moves was to fire Kerr.

The Pauley Pavilion at the University of California, Los Angeles, is named in the honor of his philanthropy and service as a regent.