The Nazis implemented anti-Jewish racial laws, known as the Nuremberg Laws, in 1935. Those laws defined “full” Jews as having three or four practicing Jews as grandparents, and those with two or one as being distinct categories of “mixed” (Mischlinge) Jews, the latter of whom received some exemptions from anti-Semitic laws. Jews were deprived of their citizenship and banned from various professions. For the next four years leading up to the war, the goal of the Nazi government was to force Jews to emigrate from the Reich, while extracting as much wealth from them as possible. The state imposed a “Reich Flight Tax,” meant to fleece fleeing Jews of as much of their wealth as possible, and in 1938, the Nazis forced all Jews to register their property, which was then expropriated in a campaign dubbed “Aryanization.”
In November of 1938 the Nazis initiated a nationwide pogrom known as the Night of Broken Glass (Kristallnacht) in which some 90 Jews were killed and 177 synagogues burned to the ground, after which 20,000 Jewish men were arrested for “disrupting the peace” and incarcerated in prison camps - this represented the first mass roundup of Jews simply for being Jewish. Hermann Göring, at the time the second most powerful Nazi leader after Hitler, then demanded one billion Marks from the German Jewish population for the damage caused by the riots. After Kristallnacht, many of the remaining German Jews desperately sought asylum outside of Germany, but were all too often rebuffed by countries which, in the midst of the Great Depression, allowed in only a trickle of immigrants each year (Jewish or otherwise). Approximately half of the 500,000 German Jews did manage to flee before the war despite the incredible difficulty of doing so at the time.
Simultaneously, high-ranking Nazi officials in the SS were exploring permanent options for ridding the Reich of Jews. Serious thought and research went into plans to create Jewish “reservations” in Poland as well as a plan to ship all of the Jews in German-held territory to the African island of Madagascar. Even after large-scale murder campaigns in Eastern Europe began in 1941, many Nazis were still seriously looking for some way to transport and dump the Jews of Europe somewhere far from Germany. The stated goal of these schemes was to render the entire face of Europe, and possibly the world, Judenrein: "Jew-Free." In the end, the “final solution to the Jewish question” - the Nazi’s euphemism for the Holocaust - was decided to consist not of deportation, but of systematic murder, but that decision does not appear to have been reached until 1941.
The irony of considering the case of German (and, as of 1938, Austrian) Jews in detail is that the large majority of the victims of the Holocaust were not from Germany. The bulk of the Jewish population of Europe was in the east, concentrated in Poland, Russia, and the Ukraine. Poland alone had a Jewish population of approximately 3,000,000, 10% of the population of Poland as a whole. Unlike the Jews of Central and Western Europe, most of the Jews of Eastern Europe were largely unassimilated, living in separate communities, speaking Yiddish as their vernacular language instead of Polish or Russian, and often facing harsh anti-Semitism from their non-Jewish neighbors (which was somewhat muted in the nominally unprejudiced Soviet Union). Thus, the Jews of the east had almost nowhere to run and few who would help them once the German war machine arrived.
When the war began, even Polish Jews were not systematically murdered right away: they were beaten, humiliated, and sometimes murdered outright, but there was not yet a campaign of focused, organized murder against them. Instead, the initial task of Nazi murder squads was the elimination of the Polish “leadership class,” which came to mean intellectuals, politicians, communists, and Catholic priests. At least 50,000 Polish social, political, and intellectual elites were murdered by SS death squads or regular German soldiers in a campaign codenamed “Operation Tannenberg.”
On encountering the enormous numbers of Jews in Poland, the Nazis opted to drive them into hastily-constructed ghettos in the towns and cities. Ghettos were neighborhoods of a town or city that were usually fenced-off, surrounded with barbed wire, and then filled with the Jews of the surrounding areas. The ghettos were built almost immediately, from late 1939 into early 1940, and ended up housing millions of people in areas that were meant to hold perhaps a few hundred thousand at most. The largest were in the large Polish cities of Warsaw and Lodz; the Warsaw Ghetto alone housed over 400,000 Jews at its height in late 1941. Conditions were atrocious: the official food ration “paid” to Jewish workers who worked as slave laborers for the Nazi war effort consisted of about 600 - 800 calories a day (an adult should consume about 2,000 a day to remain healthy). Potato peels were “as precious as diamonds” to ghetto inhabitants. The ghettos alone ended up costing the lives of approximately 500,000 people from starvation and disease.