Mesmer was born in the village of Iznang, on the shore of Lake Constance in Swabia, Germany, a son of master forester Anton Mesmer (1701 — after 1747) and his wife Maria / Ursula (1701 — 1770), née Michel. After studying at the Jesuit universities of Dillingen and Ingolstadt, he took up the study of medicine at the University of Vienna in 1759. In 1766 he published a doctoral dissertation with the Latin title De planetarum influxu in corpus humanum (On the Influence of the Planets on the Human Body), which discussed the influence of the Moon and the planets on the human body and on disease. This was not medical astrology — relying largely on Newton's theory of the tides — Mesmer expounded on certain tides in the human body that might be accounted for by the movements of the sun and moon. Evidence assembled by Frank A. Pattie suggests that Mesmer plagiarized his dissertation from a work by Richard Mead, an eminent English physician and Newton's friend. That said, in Mesmer's day doctoral theses were not expected to be original.

In January 1768, Mesmer married Anna Maria von Posch, a wealthy widow, and established himself as a physician in the Austrian capital Vienna. In the summers he lived on a splendid estate and became a patron of the arts. In 1768, when court intrigue prevented the performance of La Finta Semplice (K. 51) for which a twelve year old Wolfgang Amadeus Mozart had composed 500 pages of music, Mesmer is said to have arranged a performance in his garden of Mozart's Bastien und Bastienne (K. 50), a one act opera, though Mozart's biographer Nissen has stated that there is no proof that this performance actually took place. Mozart later immortalized his former patron by including a comedic reference to Mesmer in his opera Così fan tutte.

In 1774, Mesmer produced an "artificial tide" in a patient by having her swallow a preparation containing iron, and then attaching magnets to various parts of her body. She reported feeling streams of a mysterious fluid running through her body and was relieved of her symptoms for several hours. Mesmer did not believe that the magnets had achieved the cure on their own. He felt that he had contributed animal magnetism, which had accumulated in his work, to her. He soon stopped using magnets as a part of his treatment.

In 1775, Mesmer was invited to give his opinion before the Munich Academy of Sciences on the exorcisms carried out by Johann Joseph Gassner, a priest and healer, and also a Swabian. Mesmer said that while Gassner was sincere in his beliefs, his cures were because he possessed a high degree of animal magnetism. This confrontation between Mesmer's secular ideas and Gassner's religious beliefs marked the end of Gassner's career as well as, according to Henri Ellenberger, the emergence of dynamic psychiatry.

The scandal that followed Mesmer's unsuccessful attempt to treat the blindness of an 18 year old musician, Maria Theresia Paradis, led him to leave Vienna in 1777. The following year Mesmer moved to Paris, rented an apartment in a part of the city preferred by the wealthy and powerful, and established a medical practice. Paris soon divided into those who thought he was a charlatan who had been forced to flee from Vienna and those who thought he had made a great discovery.

In his first years in Paris, Mesmer tried and failed to get either the Royal Academy of Sciences or the Royal Society of Medicine to provide official approval for his doctrines. He found only one physician of high professional and social standing, Charles d'Eslon, to become a disciple. In 1779, with d'Eslon's encouragement, Mesmer wrote an 88 page book Mémoire sur la découverte du magnétisme animal, to which he appended his famous 27 Propositions. These propositions outlined his theory at that time.

According to d'Eslon, Mesmer understood health as the free flow of the process of life through thousands of channels in our bodies. Illness was caused by obstacles to this flow. Overcoming these obstacles and restoring flow produced crises, which restored health. When Nature failed to do this spontaneously, contact with a conductor of animal magnetism was a necessary and sufficient remedy. Mesmer aimed to aid or provoke the efforts of Nature. To cure an insane person, for example, involved causing a fit of madness. The advantage of magnetism involved accelerating such crises without danger.

Mesmer treated patients both individually and in groups. With individuals he would sit in front of his patient with his knees touching the patient's knees, pressing the patient's thumbs in his hands, looking fixedly into the patient's eyes. Mesmer made "passes", moving his hands from patients' shoulders down along their arms. He then pressed his fingers on the patient's hypochondrium region (the area below the diaphragm), sometimes holding his hands there for hours. Many patients felt peculiar sensations or had convulsions that were regarded as crises and supposed to bring about the cure. Mesmer would often conclude his treatments by playing some music on a glass armonica.

By 1780 Mesmer had more patients than he could treat individually and he established a collective treatment known as the "baquet". An English physician who observed Mesmer described the treatment as follows:

In the middle of the room is placed a vessel of about a foot and a half high which is called here a "baquet". It is so large that twenty people can easily sit round it; near the edge of the lid which covers it, there are holes pierced corresponding to the number of persons who are to surround it; into these holes are introduced iron rods, bent at right angles outwards, and of different heights, so as to answer to the part of the body to which they are to be applied. Besides these rods, there is a rope which communicates between the baquet and one of the patients, and from him is carried to another, and so on the whole round. The most sensible effects are produced on the approach of Mesmer, who is said to convey the fluid by certain motions of his hands or eyes, without touching the person. I have talked with several who have witnessed these effects, who have convulsions occasioned and removed by a movement of the hand...

In 1784, without Mesmer requesting it, King Louis XVI appointed four members of the Faculty of Medicine as commissioners to investigate animal magnetism as practiced by d'Eslon. At the request of these commissioners the King appointed five additional commissioners from the Royal Academy of Sciences. These included the chemist Antoine Lavoisier, the physician Joseph - Ignace Guillotin, the astronomer Jean Sylvain Bailly, and the American ambassador Benjamin Franklin. The commission conducted a series of experiments aimed, not at determining whether Mesmer's treatment worked, but whether he had discovered a new physical fluid. The commission concluded that there was no evidence for such a fluid. Whatever benefit the treatment produced was attributed to "imagination". As said, the investigation of the commission was not conducted on Mesmer himself, but on his work according to d'Eslon. Many affirmed that d'Eslon didn't know completely the true system of Mesmer.

Abbe Faria an Indo - Portuguese monk in Paris contemporary of Mesmer emphasized that “nothing comes from the magnetizer; everything comes from the subject and takes place in his imagination i.e., autosuggestion generated from within the mind”.

In 1785 Mesmer left Paris. In 1790 he was in Vienna again to settle the estate of his deceased wife Maria Anna. When he sold his house in Vienna in 1801 he was in Paris. Mesmer was driven into exile soon after the investigations on animal magnetism. His exact activities during the last twenty years of his life are largely unknown. He died in 1815.