The son of a minor landowner, Arakcheyev studied at the Artillery and Engineering Corps for Noble Cadets from 1783 to 1787 and was commissioned an artillery officer in the Russian army in the latter year. He became a close associate and adviser to the tsarevich Paul, who, when he became emperor in 1796, gave Arakcheyev the task of reorganizing the entire army. When his harsh disciplinary measures alienated the officers' corps, however, he was dismissed (1798) and was recalled to active duty only after Alexander I ascended the throne. Made an inspector general of the artillery in 1803, Arakcheyev reorganized that branch of the army; he then became minister of war (1808), and in 1809, during the Russo-Swedish War of 1808–09, he personally compelled the reluctant Russian forces to cross the frozen Gulf of Finland and make the attack on the Åland Islands that ultimately resulted in Sweden's cession of Finland to Russia (September 1809).

Arakcheyev generally opposed the liberal administrative and constitutional reforms considered by Alexander, and, when Alexander created the advisory Council of State (1810), Arakcheyev resigned as minister of war. He later accepted a post as head of the council's military department; and, as one of Alexander's most trusted military advisers, he handled all of the emperor's military correspondence and dispatches during the invasion by Napoleonic France in 1812. Afterward, when Alexander became almost exclusively involved in foreign affairs, Arakcheyev was made responsible for supervising the Council of Ministers' management of domestic matters (1815).

For the next decade Arakcheyev dominated the administration of Russia's internal affairs, carrying out his bureaucratic functions with brutal and ruthless efficiency. Despite his basic conservatism, he took part in the emancipation of serfs in Russia's Baltic provinces (1816–19) and also developed a plan for gradually emancipating all of Russia's serfs (1818). In addition, he supervised the creation of a system of military-agricultural colonies, which between 1816 and 1821 housed nearly one-third of Russia's standing army. After Nicholas I succeeded Alexander (1825), Arakcheyev resigned all of his offices (April 1826) and went into retirement.