Hippel studied theology at the University of Königsberg in the 1750s and became a tutor. He later reentered the university and studied law; he went on to serve in the town's court of justice, and in 1780 he was appointed mayor of Königsberg. He assumed the town's presidency in 1786.

The influence of the author Laurence Sterne can be seen in his largely autobiographical novel Lebensläufe nach aufsteigender Linie (1778–81; “Careers in an Ascending Line”), which contains elements both of pietism (in its melancholy contemplations of death and morality) and of rationalism. His second novel, Kreuz- und Querzüge des Ritters A bis Z (1793–94; “The Knight's Crisscrossing Journeys from A to Z”), portrays the prejudice and pride of the nobility in the misadventures and ultimate reconciliation with society of a quixotic hero. Hippel's two essays Über die Ehe (1774; “On Marriage”), a praise of marriage, and Über die bürgerliche Verbesserung der Weiber (1792; “On the Civic Betterment of Women”) attracted much attention with their emphasis on the emancipation of women. He also published two comedies in his youth; a number of legal, Masonic, and moral works; and hymns.