As a student Neumann participated in the German November revolution of 1918 and joined the Social Democratic Party (SPD). Neumann was instrumental in organizing the Socialist Students Society in Frankfurt, where in 1918 he met Leo Lowenthal, a future member of the Frankfurt School. At Wrocław, Leipzig, Rostock and Frankfurt am Main, Neumann studied the law and graduated in 1923 (Dr. jur., a Ph.D.). He was active from 1925 to 1927 as a teacher at the trade union academy, and later as an assistant of Hugo Sinzheimer. Neumann was active in the clandestine Leninist organization, Neu Beginnen (New Beginning), which tried to bridge the gap between the SPD and the KPD. And from 1928 to 1933 he worked in Berlin in partnership with Ernst Fraenkel as an attorney specializing on industrial law. As such he frequently represented the SPD and trade unions.
After the ascendance of the National Socialists to power, Neumann was arrested in April 1933 under the newly enacted Enabling Act, and after a month of incarceration, escaped to England. There he studied under Harold Laski at the London School of Economics and was granted a doctorate in Political Science. At Laski's recommendation Neumann joined the Frankfurt Institute of Social Research in 1936 and worked with Theodor Adorno and Max Horkheimer. Paul Massing, husband of Hede Massing, is also associated with the Frankfurt School. His presence at the Institute enhanced the critical social theory analysis of fascism and German National Socialism. Neumann moved to New York in 1936.
Neumann achieved his academic reputation with the publication of Behemoth: The Structure and Practice of National Socialism in 1942. This brought him to the attention of William J. Donovan, head of the U.S. Office of Strategic Services (OSS), who recruited Neumann first into the U.S. Board of Economic Warfare, and then in February 1942 into the OSS. In July he became the chief economist of the Intelligence Division at the Office of the U.S. Chief of Staff. In 1943 Neumann became deputy chief of the Central European Section of the OSS and worked with Arkady Gurland , Otto Kirchheimer, and Friedrich Pollock, Paul Baran, Cora DuBois, John King Fairbank, Hajo Halborn, Charles Kindleberger, Wassily Leontif, Herbert Marcuse, Barrington Moore Jr., Leo Löwenthal and Paul Sweezy.
Nuemann, Marcuse and Kirchheimer were assigned to a group in the Research and Analysis Branch (R&A) that worked on the analysis of political tendencies in Germany. They were "specifically assigned to the identification of Nazi and anti-Nazi groups and individuals; the former were to be held accountable in the war crimes adjudication then being negotiated between the four Great Powers, and the latter were to be called upon for cooperation in post-war reconstruction. For his source materials he drew upon official and military intelligence reports, extensive OSS interviews with refugees, and special OSS agents and contacts in occupied Europe; it was his duty to evaluate the reliability of each of the items of intelligence that reached him, and assemble them all into a coherent analysis on points of strength and weakness in the Reich." (Katz, 1980:116). At the end of 1944, Neumann, Marcuse, and Kirchheimer were involved in preparing a De-nazification Guide.
On 3 April 1943 the New York KGB station informed Moscow "Zarubina met for the first time with Neumann who promised to pass us all the data coming through his hands. According to Neumann he is getting many copies of reports from American ambassadors ... has access to materials referring to Germany." In the same report Neumann conveyed to Elizabeth Zarubina the substance of conversations between Pope Pius XII and Cardinal Francis Spellman, and official Spanish conversations with Italian and German generals and industrialists regarding prospects of a coup to remove Hitler.."  Neumann also supplied information on Donald Wheeler, who later couriered information from the OSS to Soviet intelligence, describing him as "a calm and progressive man". U.S. Army Signals Intelligence analysts working at Arlington Hall intercepted a Soviet intelligence message in June 1943. The decrypted message listed several Soviet agents working in the OSS and the Office of War Information; five of the Soviet sources have been identified: Maurice Halperin, Duncan Lee, Julius Joseph, Franz Neumann, and Bella Joseph. Shortly before the 20 July 1944 assassination attempt on Hitler's life, Neumann described in detail negotiations between the German dissident conspirators and Allen Dulles. New York Rezident Vasily Zarubin sent several reports to Moscow that month based on Neumann's information. Anatoly Gorsky, an official of the Soviet Committee of Information (KI), in his 1948 Memorandum on Compromised American Sources and Networks listed Neumann as a member of the "Redhead group" headed by Hede Massing. Neumann received naturalized American citizenship in late 1943, and after Zarubina left the United States in the later half of 1944 Neumann had no further contact with Soviet intelligence.
In the summer of 1945, Neumann travelled to Nuremberg, where he was to become the first chief of research of the Nuremberg War Crimes Tribunal under chief prosecutor Justice Robert Jackson. Neumann was tasked with preparing an analysis of each of the twenty-two Nuremberg defendants, and various Nazi organizations. From mid-September 1945, Neumann’s R&A team prepared and supervised materials for a series of indictments with other OSS colleagues responsible for both interrogation and document analysis. Donovan initially directed Neumann to examine religious persecution under the Nazi regime.
The reports analysis of "the problem of establishing criminal responsibility" provided the prosecutorial strategy. The thinking was to show that measures taken against the Christian Churches were an integral part of National Socialism. It also attempted to show that measures were criminal from the standpoint of German or international law, depending where a given act was committed. This applied the typical Frankfurt School methodology of "immanent critique" to argue that the Nazi regime can be convicted most effectively by demonstrating that it violated not only the laws of ‘foreign’ occupied countries, but also the very ‘Germanic’ traditions it claimed to uphold. The report claimed key articles of the Weimar Constitution "were never formally abrogated by the National Socialist regime, … were left untouched and still remain theoretically in force." Furthermore: "respect for the principle of religious freedom", continued to be reiterated in various official policy statements of the Nazi regime, and in various "enactments of the National Socialist state, particularly the Concordat of 20 July 1933."
The material on religious persecution is placed in the wider context of how these agencies committed crimes against humanity as an integral part of the Nazi’s master plan, its conspiracy to seize and consolidate ideological control and totalitarian power within Germany by eradicating sources of actual and potential opposition. This material formed part of the evidence on which these agencies were judged to be criminal organisations. Neumann's group wrote,
"The Nazi conspirators, by promoting beliefs and practices incompatible with Christian teaching, sought to subvert the influence of the Churches over the people and in particular over the youth of Germany. They avowed their aim to eliminate the Christian Churches in Germany and sought to substitute therefore Nazi institutions and Nazi beliefs and pursued a programme of persecution of priests, clergy and members of monastic orders whom they deemed opposed to their purposes and confiscated Church property."
Neumann also took charge of revising the first draft prosecution brief detailing the personal responsibility of Hermann Goering, the most senior defendant. Neumann believed that German war criminals should be tried before German courts according to Weimar law as an important part of the wider de-nazification effort. He continued working for a coming together of the Communist and [[Social Democratic] Party|Social Democratic]] movements. He later became disillusioned with the reality of Communist rule in East Germany and broke off contact with the Communists.
In 1948 Neuman became as a professor of Political Science at Columbia University, and helped establish the Free University of Berlin. Together with Ernst Fraenkel and Karl Lowenstein, Neumann is considered to be among the founders of modern political science in the Federal Republic of Germany. He is noted together with Fraenkel, Hannah Arendt, Ernst and Carl J. Friedrich as developing the Totalitarian theory. U.S. President Ronald Reagan's National Security Advisor and United Nations Ambassador Jeanne Kirkpatrick was a student of Neumann's at Columbia University. Neumann died in an automobile accident in 1954. His widow, Inge Werner, married Herbert Marcuse in 1955.
- KGB File 28734, Vol. 1, pgs. 7, 8, 14, 15, 20, 23, 28.
- KGB File 45049, Vol. 2, pg. 9.
- John Earl Haynes, Comparative Analysis of Cover Names (Code Names) in the Gorsky Memo and Cover Names in Venona, 2005; "'Ruff' ['Ersh' or 'Yeursch'] – Franz Neumann, former consultant in the Department of Research and Analysis of the OSS"; 'Ersh' is Russian for a type of fish known as 'Ruff' or 'Ruffe' in English but also has several other meanings, including that of a mixed beer and vodka drink.
Books by Franz Neumann
- Die politische und soziale Bedeutung der arbeitsgerichtlichen Rechtsprechung. Berlin: Laub. 1929.
- Tarifrecht auf der Grundlage der Rechtsprechung des Rechsarbeitsgerichts. Berlin: Allgemeiner Deutscher Gewerkschaftsbund. 1931.
- Koalitionsfreiheit und Reichsverfassung. Die Stellung der Gewerkschaften im Verfassungssystem. Berlin: Heymann. 1932.
- Trade Unionism, Democracy, Dictatorship. Preface by Harold J. Laski. London: Workers' Educational Trade Union Committee. 1934. (Published in the U.S. as European Trade Unionism and Politics, ed. Carl Raushenbuch. New York: League for Industrial Democracy, 1936.)
- (under pseudonym Leopold Franz) Die Gewerkschaften in der Demokratie und in der Diktatur. Probleme des Sozialismus, 13. Karlsbad: Graphia. 1935.
- Behemoth: The Structure and Practice of National Socialism. London: Gollancz. 1942.
- Behemoth: The Structure and Practice of National Socialism, 1933 - 1944. 2nd rev. edn, with new appendix. Toronto: Oxford University Press. 1944.
- The Democratic and the Authoritarian State: Essays in Political and Legal Theory, ed. Herbert Marcuse. Glencoe, Ill.: Free Press. 1957.
- Wirtschaft, Staat, Demokratie. Aufsätze 1930 - 1954, ed. Alfons Söllner. Frankfurt a.M.: Suhrkamp. 1978.
- Die Herrschaft des Gesetzes. Eine Untersuchung zum Verhältnis von politischer Theorie und Rechtssystem in der Konkurenzgesellschaft , trans. & ed. Alfons Söllner. Frankfurt a.M.: Suhrkamp. (German trans. of the 1936 doctoral dissertation, 'The Governance of the Rule of Law: an Investigation into the Relationship between the Political Theories, the Legal System, and the Social Background in the Competitive Society') London School of Economics, 1936 (supervisor: Harold J. Laski). 1980.
- The Rule of Law: Political Theory and the Legal System in Modern Society, ed. Matthias Ruete. Leamington Spa: Berg. 1986.
- Ian Bryan and Michael Salter, War Crimes Prosecutors and Intelligence Agencies: The Case for Assessing Their Collaboration, Taylor & Francis Group, Volume 16, Number 3, September 2001.
- Barry M. Katz, The Criticism of Army: The Frankfurt School Goes to War. Journal of Modern History 59 (September 1987).
- Barry M. Katz, Foreign Intelligence (Cambridge, MA: Harvard University Press, 1989).
- Rolf Wiggershaus, The Frankfurt School, Cambridge, Mass., MIT Press, 1994.
- European War Crimes Trials: A Bibliography, compiled and annotated by Inge S. Neumann. Additional material furnished by the Wiener Library, London. Edited by Robert A. Rosenbaum. Publisher: New York, Carnegie Endowment for International Peace, 1951.
- Martin Jay, The Dialectical Imagination. A History of the Frankfurt School and the Institute of Social Research 1923-1950. Little Brown and Company, Canada. 1973. 
- William E. Scheuerman, Franz Neumann - Legal Theorist of Globalization?, Kritische Justiz, 2002.
- Allen Weinstein and Alexander Vassiliev, The Haunted Wood: Soviet Espionage in America—the Stalin Era (New York: Random House, 1999), pgs. 249-51, 254, 261.
- Franz Neumann Project
- Inge S. Neumann
- Brig. Gen. John Magruder (Director of the Strategic Services Unit) to McCloy (Assistant Secretary of War, Department of War), Strategic Services Unit as of 1 October 1945, Washington, October 9, 1945 CIA Historical Files, HS/HC-265, (on file with the Rutgers Journal of Law and Religion).
- Claire Hulme & Dr. Michael Salter, The Nazi's Persecution as a War Crime: The OSS Response Within the Nuremeberg Trial's Process, Rutgers Journal of Law and Religion, n.d.
- Forced Migration and Scientific Change : Emigré German-Speaking Scientists and Scholars after 1933, German Historical Institute, Mitchell G. Ash, Ed. (2002). 
- Bruce Cumings, Boundary Displacement: Area Studies and International Studies during and after the Cold War, Bulletin of Concerned Asian Scholars, 1993. 
- Michael Salter, Neo-Fascist Legal Theory on Trial: An Interpretation of Carl Schmitt's Defence at Nuremberg from a Perspective of Franz Neumann's Critical Theory of Law 
- Jeffrey Herf, The "Jewish War", Holocaust and Genocide Studies, Vol. 19, No. 1. (2005).