Rainier was born at Prince's Palace in Monaco, the only son of Prince Pierre of Monaco, Duke of Valentinois and his wife, the Monegasque Hereditary Princess, Charlotte, Duchess of Valentinois. Rainier was the first native-born hereditary Prince of Monaco since Honore IV in 1758. Rainier's mother was the only child of Prince Louis II of Monaco and Marie Juliette Louvet; she was later legitimized through formal adoption and subsequently named heir presumptive to the throne of Monaco. Rainier's father was a half-French, half-Mexican who adopted his wife's surname, Grimaldi, upon marriage and was made a Prince of Monaco by Prince Louis, his father-in-law. Rainier had one sibling, Princess Antoinette, Baroness of Massy.
Rainier's early education was conducted in England, at the prestigious public schools of Summerfields in St Leonards-on-Sea, Sussex, and later at Stowe, in Buckinghamshire. After England, Rainier attended the Institut Le Rosey in Rolle and Gstaad, Switzerland from 1939, before continuing to the University of Montpellier in France, where he obtained a Bachelor of Arts degree in 1943, and finally to the Institut d'études politiques de Paris in Paris.
In the 1940s and 1950s, Rainier had a ten-year relationship with the French film Actress Gisèle Pascal, whom he had met while a student at Montpellier University, and the couple lived at Saint-Jean-Cap-Ferrat. Rainier's sister, Princess Antoinette, wishing her own son to ascend the throne, spread rumours that Pascal was infertile. The rumours combined with a snobbery over Pascal's family origins ultimately ended the relationship.
In 1944, upon his 21st birthday, Rainier's mother renounced her right to the Monegasque throne and Rainier became Prince Louis's direct heir. In World War II Rainier joined the Free French Army in September 1944, and serving under General de Monsabert as a second lieutenant, and seeing action during the German counter-offensive in Alsace. He received the French Croix de Guerre with bronze star (representing a brigade level citation) and was given the rank of Chevalier in the French Legion of Honor in 1947. Following his decommission from the French Army, he was promoted by the French government as a captain in April 1949 and a colonel in December 1954.
Rainier established a postal museum in 1950: the Museum of Stamps and Coins, in Monaco's Fontvieille district by using the collections of the Monegasque princes Albert I and Louis II. The prestigious philatelic Collectors club Club de Monte-Carlo de l'Élite de la Philatélie was established under his patronage in 1999; the club has its headquarters at the museum, with its membership restricted to institutions and one hundred prestigious Collectors. Rainier organized exhibitions of rare and exceptional postage stamps and letters with the club's members. Throughout his reign, Rainier surveyed all the process of creation of Monaco stamps. He liked stamps printed in intaglio and the art of engravers Henri Cheffer and Czesław Słania.
As Prince of Monaco, Rainier was also responsible for the principality's new constitution in 1962 which significantly reduced the power of the sovereign. (He suspended the previous Constitution in 1959, saying that it "has hindered the administrative and political life of the country.") The changes ended autocratic rule, placing power with the Prince and a National Council of eighteen elected members.
After ascending the throne, Rainier worked assiduously to recoup Monaco's lustre, which had become tarnished through neglect (especially financial) and scandal (his mother, Princess Charlotte, took a noted jewel thief known as René the Cane as her lover). According to numerous obituaries, the Prince was faced upon his ascension with a treasury that was practically empty. The small nation's traditional gambling clientele, largely European aristocrats, found themselves with reduced funds after World War II. Other gambling centers had opened to compete with Monaco, many of them successfully. To compensate for this loss of income, Rainier decided to promote Monaco as a tax haven, commercial center, real-estate development opportunity, and international tourist attraction. The early years of his reign saw the overweening involvement of the Greek shipping tycoon Aristotle Onassis, who took control of the Société des Bains de Mer (SBM) and envisioned Monaco as solely a gambling resort. Prince Rainier regained control of SBM in 1964, effectively ensuring that his vision of Monaco would be implemented. In addition, the Societé Monégasque de Banques et de Métaux Précieux, a bank which held a significant amount of Monaco's capital, was bankrupted by its Investments in a media company in 1955, leading to the resignation of Monaco's cabinet.
In 1979, Prince Rainier made his acting debut alongside his wife Grace in a 33-minute independent film called Rearranged, produced in Monaco. According to co-star Edward Meeks, after premiering it in Monaco, Grace showed it to ABC TV executives in New York in 1982, who expressed interest if extra scenes were shot to make it an hour long. However, Grace died in a car crash caused by a stroke in 1982, making it impossible to expand the film for American release.
Prince Rainier smoked 60 cigarettes a day. In the last years of his life his health progressively declined. He underwent surgery in late 1999 and 2000, and was hospitalized in November 2002 for a chest infection. He spent three weeks in hospital in January 2004 for what was described as general fatigue. In February 2004, he was hospitalized with a coronary lesion and a damaged blood vessel. In October he was again in hospital with a lung infection. In November of that year, Prince Albert appeared on CNN's Larry King Live and told Larry King that his father was fine, though he was suffering from bronchitis.