His best-known roles were that of Mephistopheles in Goethe's Faust in 1960, and as "Der Schränker" (The Safecracker) who is the chief judge of the kangaroo court presiding over Hans Beckert (Peter Lorre) in Fritz Lang's M. Born in Düsseldorf, Gründgens attended the drama school of the Düsseldorfer Schauspielhaus after World War I and started his career at smaller theaters in Halberstadt, Kiel, and Berlin.

Apart from spoken theatre, Gründgens also worked with Otto Klemperer at the Kroll Opera, as a cabaret artist and as a screen actor, most notably in Fritz Lang's 1931 film M, which significantly increased his popularity.

During the denazification process, his statements helped to exonerate acting colleagues, including Göring’s widow, Emmy, and Veit Harlan, director of the film Jud Süß.

While other homosexuals were persecuted and sent to concentration camps during the Third Reich, Gründgens was tolerated by the Nazi elites because of his high reputation as an actor.

Posthumously, Gründgens was involved in one of the more famous literary cases in 20th-century Germany as the subject of the novel Mephisto by his former lover Klaus Mann, who had died in 1949.

The novel, a thinly veiled account of Gründgens's life, portrayed its main character Hendrik Höfgen as having shady connections with the Nazi regime.

Gründgens' adopted son and heir Peter Gorski, who had directed Faust, successfully sued the publisher on his late father's behalf in 1966.

In the time-consuming lawsuit, the controversy over libel and the freedom of fiction from censorship was finally decided by the Federal Constitutional Court in 1971.