Raunkiaer was born in Varde. He graduated in botany in 1885 and was a scientific assistant at the Botanical Garden and Botanical Museum in Copenhagen from 1893 to 1911. From 1912 until 1923 he was professor of botany at the University of Copenhagen.

Raunkiaer is best known for his method of classifying ‘life forms’ based on the position of the perennating buds of plants and the degree of protection that these give in cold conditions or in drought. In general, the closer these buds are to the ground, the greater the protection. Raunkiaer's classification is useful for dividing areas of vegetation into groups and for investigating the occurrence of these groups under different climatic conditions.