Born in Klagenfurt, Rauter graduated from High school in 1912 and started training as an Engineer at the Graz University of Technology. At the outbreak of World War I Rauter volunteered for service in the Austro-Hungarian Army. He served with a "Gebirgsschützenregiment" and was discharged in 1919, having reached the rank of Oberleutnant. Rauter took part in the Austro-Slovene conflict in Carinthia, and from May until July 1921 he fought in the Freikorps Oberland in Oberschlesien. For his service during the war, Rauter received several decorations including Austrian Military Merit Cross 3rd Class with War decoration, Silver Medal for Bravery, Wound Medal or Karl Troop Cross.