On June 23, 1944, the Nazis permitted the visit by the Red Cross in order to dispel rumors about the extermination camps. The commission included E. Juel-Henningsen, the head physician at the Danish Ministry of Health, and Franz Hvass, the top civil servant at the Danish Foreign Ministry. Dr. Paul Eppstein was instructed by the SS to appear in the role of the mayor of Theresienstadt.

To minimize the appearance of overcrowding in Theresienstadt, the Nazis deported many Jews to Auschwitz. Also deported in these actions were most of the Czechoslovakian workers assigned to 'Operation Embellishment.' They also erected fake shops and cafés to imply that the Jews lived in relative comfort. The Danes whom the Red Cross visited lived in freshly painted rooms, not more than three in a room. The guests enjoyed the performance of a children's opera, Brundibar.

The hoax against the Red Cross was so successful for the Nazis that they went on to make a propaganda film at Theresienstadt. Production of the film began on February 26, 1944. Directed by Jewish prisoner Kurt Gerron, it was meant to show how well the Jews lived under the "benevolent" protection of the Third Reich. After the shooting most of the cast, and even the filmmaker himself, were deported to Auschwitz. Gerron and his wife were executed in the gas chambers on October 28, 1944. The film was not released at the time, but was edited into pieces that served their purpose, and only segments of it have remained.

Theresienstadt was originally designated to house privileged Jews from Germany, Czechoslovakia, and Austria. Many educated Jews were inmates of Theresienstadt, and the camp was known for its rich cultural life. At least four concert orchestras operated in the camp, as well as chamber groups and jazz ensembles. Several stage performances were produced and attended by camp inmates. Some prominent artists from Czechoslovakia, Austria, and Germany were either born in Theresienstadt or found their death there. There were artists, writers, scientists and jurists, diplomats, musicians, and scholars.

The community in Theresienstadt ensured that all the children that passed through continued with their education. Though the Nazis decreed that all camp children over a certain age must be gainfully employed, working on stage was considered employment, and the children's education often continued under the guise of work or cultural activity. Daily classes and sports activities were held and the magazine Vedern was edited there. This affected some 15,000 children, of whom only about 1,100 survived to the end of the war. Other estimates place the number of the surviving children as low as 100.