The old Nürburgring was considered the most challenging purpose-built circuit in the world. Measuring 14.2 miles and built in the Eifel mountains, it had over 1,000 feet of elevation change. Though slightly remodelled in 1971, it retained the character that led three-time world champion Jackie Stewart to nickname it "The Green Hell." Its extraordinary size required at least five times the marshals and medical support of almost any other Grand Prix — resources the German organizers could not provide. The circuit was narrow, had few run-off areas, and numerous sections were nearly inaccessible to fire marshals. Several points, including Flugplatz and Pflanzgarten, could send cars airborne. Varying weather conditions across the circuit made safe tyre choice difficult. Two weeks before the 1976 race, a fatal crash at Flugplatz during practice for a Formula Super-Vee race was, according to Autosport, the 131st fatality at the Nürburgring in its 49-year history. It had already been decided before the 1976 race that it would be the last German Grand Prix on the Nordschleife.
Defending world champion Niki Lauda, also the season's points leader, was deeply concerned about the circuit's safety and the forecast rain. He attempted to arrange a driver boycott but was defeated by one vote, and the race proceeded. Several lineup changes occurred: Jacky Ickx was fired from Walter Wolf Racing and replaced by Arturo Merzario. The new team Scuderia Rondini acquired an old Tyrrell 007 for Alessandro Pesenti-Rossi, marking his Formula One World Championship debut. Rolf Stommelen had been set to race a RAM Brabham BT44, but local police impounded the RAM cars mid-practice due to a legal action by former driver Loris Kessel. Stommelen transferred to the works Brabham team to drive a spare Alfa-Romeo-powered BT45. Lella Lombardi, also part of the RAM squad, could not find a replacement drive.
Due to wet conditions on Saturday, the grid was set by Friday qualifying, with lap times comparable to 1972. James Hunt took pole position, Niki Lauda qualified second, and Patrick Depailler lined up third in the six-wheeled Tyrrell P34. Hans-Joachim Stuck was fourth in his March ahead of Clay Regazzoni, Jacques Laffite, Carlos Pace, Jody Scheckter, Jochen Mass, and Carlos Reutemann. In 1975, Lauda had been the first and only driver to break the seven-minute mark at the circuit; fans were curious whether the technical rule changes — most visibly the disappearance of high air boxes — would allow faster times.
The 14-lap race was originally due to start at 1:30pm, but a 15-minute delay was announced to clear Renault 5 saloon cars from a preceding race. The start was further pushed to 2:05pm as the weather turned wet on the far side of the circuit. Most drivers started on wet tyres; Jochen Mass, experienced at the Nürburgring and expecting improving conditions, gambled on dry-weather tyres. At the start Clay Regazzoni took the lead while Hunt and Lauda fell back; Hunt moved into second, Jochen Mass quickly rose to third, and Jacques Laffite was fourth. Hans-Joachim Stuck's car had been pushed off the grid with a clutch problem, though he started from the back. Regazzoni spun and dropped to fourth. Weather turned dry at the end of lap one; most drivers pitted for dry tyres, leaving Ronnie Peterson, who stayed out, briefly ahead of Mass. By the end of lap two, Mass led with Gunnar Nilsson second and Hunt third.
Niki Lauda had changed tyres after lap one and was pushing hard to recover lost time. Just after the fast left kink before the Bergwerk right-hand curve, his Ferrari 312T2 snapped to the right and spun through the fencing into an earth bank. The car bounced back onto the track, enveloped in flames. Guy Edwards managed to avoid it; Brett Lunger hit the Ferrari and Harald Ertl then struck Lunger's car. All three drivers stopped and attempted to pull Lauda from the flames; Arturo Merzario also stopped after seeing the wreck. Lauda suffered serious burns and was airlifted to the Bundeswehr hospital in Koblenz, then transferred to the Trauma Clinic in Ludwigshafen — home to Germany's most advanced burn ward — where he fought for his life for several days.
The race was stopped after the accident. A key concern highlighted by the crash was that the circuit's one helicopter was parked at the pits — at one extreme end of the circuit — and took five to six minutes to reach the accident site. The efforts of fellow drivers who stopped were credited with saving Lauda's life.
The race restarted at 3:10pm, with 20 of the 24 original starters continuing. Chris Amon decided not to restart. Hunt passed Regazzoni, Scheckter, Depailler, and Carlos Pace to take the lead permanently. At Flugplatz, Ronnie Peterson lost control of his March and crashed heavily; Regazzoni spun again and Depailler also went off. Pace overtook Scheckter, and on the third lap Vittorio Brambilla crashed at Adenau Bridge due to brake failure on his March, placing sixth. Mass overtook Nilsson on lap five and Pace on lap ten. On lap twelve, Regazzoni spun again and Mass moved to third, with Pace fourth, Nilsson fifth, and Rolf Stommelen sixth. Hunt won.
Chris Amon announced he was ending his career immediately after Lauda's accident, but returned at the 1976 Canadian Grand Prix, driving a Williams-Ford for Walter Wolf Racing. Lauda's accident accelerated the consensus that the old Nürburgring was unmanageable for Formula One. After the circuit was rebuilt — bypassing the Nordschleife — Formula One returned to a new 2.8-mile layout, with European Grands Prix beginning in 1984 and the German Grand Prix from 1985. The 1976 race was also the 10th Grand Prix start for Ligier.
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