Two brothers, Louis Rauch and Philip Rauch, Jr., established the Foundation in 1961. Funding for the Foundation was made possible by the success of the Ideal Corporation, founded in 1913 by Philip Rauch, Sr., which manufactured auto parts in Brooklyn, New York. Under the direction of the two brothers, the company grew and in 1971 merged with Parker Hannifin, a Fortune 500 company. Philip Rauch, Jr. joined the board of directors and became Chairman of Parker Hannifin in 1973.

The Rauch Foundation believes in investing in the future of the communities it calls home - Long Island and Maryland. Until the mid-1980s, the Foundation funded a wide range of projects in the arts, environment, health care and education. In the late 1980s the Foundation made a strategic decision to focus and invest intensively on fewer areas, as a way to have a substantial impact on each.

Since 1991, Nancy Rauch Douzinas has been the President of the Foundation.