Mackensen was born in Haus Leipnitz, near the village of Dahlenberg in the Prussian Province of Saxony, to Louis and Marie Louise Mackensen. His father, an administrator of agricultural enterprises, sent him to a Realgymnasium in Hallein 1865, with the apparent hope that Mackensen would follow him in his profession.

Mackensen began his military service in 1869 as a volunteer with the Prussian 2nd Life Hussar Regiment (Leib-Husaren-Regiment Nr. 2). During the Franco - Prussian War he was promoted to second lieutenant and recommended for the Iron Cross, Second Class. He left service and studied at the Halle University, but formally returned to the German Army in 1873, with his old regiment.

In 1891 he joined the General Staff in Berlin, where he was heavily influenced by the new chief, Alfred von Schlieffen. From 17 June 1893 to 27 January 1898, Mackensen commanded the 1st Life Hussar Regiment (Leib-Husaren-Regiment Nr. 1), to which he became à la suite when he left command and whose uniform he often wore as a general. He was ennobled on 27 January 1899, becoming August von Mackensen. From 1901 to 1903, he commanded the Life Hussar Brigade (Leib-Husaren-Brigade), and from 1903 to 1908 he commanded the 36th Division in Danzig. When Schlieffen retired in 1906 Mackensen was regarded by some as a possible successor, but the job went to Helmuth von Moltke the Younger. In 1908, Mackensen took command of the XVII Army Corps, and commanded this corps until shortly after the beginning of World War I.

At the beginning of World War I Mackensen remained in command of XVII Army Corps as part of the Eighth Army under first General Maximilian von Prittwitz and then General Paul von Hindenburg and saw action in the battles of Gumbinnen and Tannenberg. On 2 November 1914 Mackensen took command of the Ninth Army from General von Hindenburg, who had been named Supreme Commander East (Oberbefehlshaber Ost). On 27 November 1914 Mackensen was awarded the Pour le Mérite, Prussia's highest military order, for actions around Łódź and Warsaw. He commanded the Ninth Army until April 1915, when he took command of the Eleventh Army and Army Group Kiev (Heeresgruppe Kiew), seeing action in Galicia, and assisting in the capture of Przemyśl and Lemberg. He was awarded oak leaves to the Pour le Mérite on 3 June 1915 and promoted to field marshal on 22 June. After this campaign, he was awarded the Order of the Black Eagle, Prussia's highest ranking order of knighthood. During this period, he also received numerous honours from other German states and Germany's allies, including the Grand Cross of the Military Max Joseph Order, the highest military honour of the Kingdom of Bavaria, on 4 June 1915.

In October 1915, Mackensen, in command of the newly-formed Army Group Mackensen (Heeresgruppe Mackensen, which included the German 11th army, Austro - Hungarian 3rd army, and Bulgarian 1st army), led a renewed German - Austro - Hungarian - Bulgarian campaign against Serbia. The campaign finally crushed effective military resistance in Serbia but failed to destroy the Serbian army, which, though cut in half, managed to withdraw to Entente held ports in Albania and, after recuperation and rearmament by the French, reentered fighting on the Macedonian front. During the fight for Belgrade, the troops of the Central Powers encountered a very stiff resistance, so Mackensen erected a monument to the Serbian soldiers who died defending Belgrade, saying, "We fought against an army that we have heard about only in fairy tales".

He followed this up in 1916 with a successful campaign against Romania (under the overall command of General Erich von Falkenhayn). He was in command of a multi-national army of Bulgarians, Ottoman Turks, and Germans. Despite this, his offensives were very successful, breaking every army that faced his own. On 9 January 1917, Mackensen was awarded the Grand Cross of the Iron Cross, becoming one of only five recipients of this honour in World War I.

From 1917 on, Mackensen was the military governor of the parts of Romania (mainly Wallachia) controlled by the Central Powers. His last campaign was an attempt to destroy the Romanian Army, which had been reorganised after the Kerensky Offensive, and occupy the rest of the country. But the attempt failed at the Battle of Mărăşeşti, with both sides taking heavy losses. At the end of the war, he was captured by General Louis Franchet d'Espèrey's Allied army in Hungary (namely by the Serbian units) and held as a military prisoner in Futog, until November 1919.

In 1920, Mackensen retired from the army. Although standing in opposition to the newly established republican system, he avoided public campaigns. Around 1924 he changed his mind and began to use his image as war hero to support conservative, monarchic groups. He routinely appeared in his old Life Hussars uniform. He became very active in pro-military conservative organisations, particularly Stahlhelm and the Schlieffen Society.

During the German elections of 1932 Mackensen supported Hindenburg over Adolf Hitler, but following the latter's accession to power Mackensen became a visible, if only symbolic, supporter of the Nazi regime. Mackensen's high-profile public visibility in his distinctive black Life Hussars uniform was recognized by the Hausser - Elastolin company which produced a 7-cm figure for its line of Elastolin composition soldiers. Mackensen's fame and familiar uniform gave rise to two separate Third Reich formations adopting black dress with Totenkopf badges: the Panzerwaffe, which claimed the tradition of the Imperial cavalry; and Hitler's "Life Guards," the SS.

Although Mackensen appeared in his black uniform at some public events presented by the German government or the Nazi party, he objected to the killings of Generals Ferdinand von Bredow and Kurt von Schleicher during The Night of the Long Knives purge of July 1934, and to atrocities committed during the fighting in Poland in September 1939. By the early 1940s Hitler and Joseph Goebbels suspected Mackensen of disloyalty but could do nothing. Mackensen remained a committed monarchist and appeared in full uniform at Kaiser Wilhelm II's 1941 funeral.

Mackensen died at the age of 95, his life having spanned the Kingdom of Prussia, the German Empire, the Weimar Republic, Nazi Germany, and post-war Allied occupation.

Mackensen married Dorothea von Horn (1854 – 1905) in November 1879, they had five children. After the death of his first wife Mackensen married Leonie von der Osten (1878 – 1963) in 1908.