Born into a wealthy and noble Roman Catholic family in Werl, Westphalia, the son of Friedrich von Papen zu Köningen (1839–1906) and his wife Anna Laura von Steffens (1852–1939), Papen was trained as an army officer and as a Herrenreiter ("gentleman rider"), a sport Papen very much enjoyed. Papen was proud of his family's having been granted hereditary rights since the 13th century to mine salt at Werl. Papen always believed in the superiority of the aristocracy over commoners. An excellent horseman and a man of much charm, Papen cut a dashing figure and during this time, made the fateful friendship with Kurt von Schleicher. He had married Martha von Boch-Galhau (1880–1961) on 3 May 1905. Papen's wife was the daughter of a wealthy Saarland industrialist whose dowry made him a very rich man. Fluent in both French and English, Papen traveled widely all over Europe, the Middle East and North America.
Papen served for a period as a military attendant in the Kaiser's Palace, before joining the German General Staff in March 1913. Papen was devoted to Wilhelm II, believing that the Kaiser was always right and just, which justified breaking international law, which Papen dismissed as insignificant compared to the greatness of the Kaiser. The most important intellectual influence on the young Papen were the books of General Friedrich von Bernhardi, who wrote war is "not only an integral part of humanity, but the great civilizing influence of the world". Throughout his life, recurring themes of Papen's philosophy were an intense militarism, a belief that Germany had to wage war on others to be great in the Social Darwinian competition of nations, and that "might is right".
He entered the diplomatic service in December 1913 as a military attaché to the German ambassador in the United States. In early 1914 he travelled to Mexico (to which he was also accredited) and observed the Mexican Revolution, returning to Washington, DC in August of that year on the outbreak of the First World War.
In February 1913, General Victoriano Huerta came to power in Mexico by overthrowing President Francisco Madero, who was then "shot while trying to escape", which was the standard euphemism for extrajudicial executions in Mexico. As the United States had imposed an arms embargo on Mexico as Huerta had come to power via a coup, Huerta had to buy arms from Europe and Japan in order to fight the nationwide insurrection that had broken out against his rule in 1913 almost immediately after his coup d'état. Papen supported the idea of selling German arms to Huerta, and was most anxious to go to Mexico City to win Huerta's friendship. Ideas about white supremacy were widely accepted all over the Western world at the time, which led most Westerners to have a dismissive view of the Mexican people as most Mexicans were either Indians or mestizos (of mixed Spanish and Indian descent), and only a minority were Spanish immigrants or their criollo descendants. The Mexican Revolution was viewed at the time in the West in racist terms, as the sort of murderous anarchy that was alleged to result when Indians and mestizos had too much freedom. As a result, all of the European governments backed General Huerta, who attempted to create an intensely militarist regime as the best man to impose the "iron hand" alleged to be needed to "pacify" Mexico. Papen shared these views, reporting to Berlin that Huerta was "the only strong man" in Mexico, who could impose the "iron hand".
During his time in Mexico, Papen differed with ambassador von Hintze about the long-term viability of Huerta's regime with Papen arguing Huerta would prevail provided that he received enough support. At one time, when the anti-Huerta Zapatistas were advancing on Mexico City, Papen organized a group of European volunteers to fight for Huerta. In the spring of 1914, as German military attaché to Mexico, Papen was deeply involved in selling arms to the government of General Huerta, believing he could place Mexico in the German sphere of influence, though the collapse of Huerta's regime in July 1914 ended that hope. In April 1914, Papen personally observed the Battle of Veracruz when the US seized the city of Veracruz, despite orders from Berlin to stay in Mexico City. During his time in Mexico, Papen acquired the love of international intrigue and adventure that was to characterize his later diplomatic postings in the United States, Austria and Turkey.