The generic name is derived from Greek "[ominous birth of a] monster" and sauros, "lizard". The specific name refers to Suevia. The holotype was found in the Mittlerer Stubensandstein. It consists of a 245 millimetres long right maxilla with six large, up to five centimetres long, teeth, erroneously interpreted by von Meyer as the left maxilla. It indicates a body length of about six metres. Many popular books in the 20th century depicted "teratosaurs" as the earliest sort of large-bodied meat-eating dinosaur, walking on two legs and preying on the prosauropods of its day. It was thought by many to be a Triassic ancestor to the "carnosaurs" of the Jurassic. Sauropodomorph material was described as Teratosaurus species such as Teratosaurus minor and Teratosaurus trossingensis.
In 1985 and 1986, Peter Galton and Michael Benton independently showed that Teratosaurus is actually a rauisuchian, a type of nondinosaurian large predatory archosaur, walking on all fours, which lived alongside dinosaurs during the Late Triassic