As an Innsbruck lawyer of monarchist political sympathies attached to the Christian Social Party, he was elected to the federal Nationalrat (lower house of parliament) in 1927. Later, in the government of Engelbert Dollfuss (1932–34) he was first appointed minister of justice (1932), then minister of education (1933); and after Dollfuss' assassination (1934), he was named federal chancellor. He eliminated the threats to his government posed by the Heimwehr, a national paramilitary defense force led by his vice chancellor, Ernst Rüdiger, Fürst von Starhemberg, whom he forced out of office in May 1936. After disbanding the Heimwehr in October, Schuschnigg became the leader of the Fatherland Front, a coalition of right-wing parties. He strengthened ties with the fascist Italian government and strongly propagated the idea of Austria as a second German state. However, Schuschnigg's subsequent concessions to Hitler on the status of Austrian Nazis, starting with the signing of an agreement in July 1936, represented the beginning of the end of Austrian independence.

After a humiliating capitulation to Hitler at Berchtesgaden (February 1938), he determined to reassert national independence through a plebiscite to be held on March 13. But his plans were effectively negated by the German invasion and annexation of Austria (Anschluss), March 11–13.

Schuschnigg had been forced to resign on March 11 and was imprisoned by the Nazis shortly thereafter. He was freed only after World War II (May 1945). He lived and taught in the United States (1948–67), after which he returned to Austria where he wrote Im Kampf Gegen Hitler (1969; The Brutal Takeover, 1971).