This article is from the X-Men Comic Books FAQ, by Kate the Short (email@example.com) with numerous contributions by others.
The first inkling of a Mystique/Nightcrawler relationship came in UXM
#141-142, the original "Days of Future Past" storyline, which introduced
the whole "future ruled by Sentinels" idea to the X-titles.
Mystique, who was a villain from the Ms. Marvel series, was trying to
arrange the assassination of Senator Robert Kelly. Kitty Pryde was
possessed by her future self, sent back in time by Rachel Summers, to
try and stop Mystique. And somewhere in there, Nightcrawler saw
Mystique... and recognized her from somewhere.
The original plan from Claremont was that Mystique, a shapechanger based
in feminine form, was actually Kurt's father. Drunk and amnesiac after
the events of World War II, Mystique was taken in by Irene Adler
(Destiny), and the two of them had a child, Kurt Wagner (Nightcrawler).
Marvel being a corporate-run company that, for a while, didn't even
allow the word "homosexual" to appear in their books, quickly informed
Claremont of the Great Displeasure he would find if he were to pursue
that plot thread. It was thusly dropped, except for one scene in
Murderworld (UXM #177) where Mystique showed that she was capable of
killing anyone, even her adoptive daughter Rogue, except Nightcrawler.
Cut ahead to the 1990s. Claremont was long gone, and Lobdell and Niceiza
were left with the unpleasant task of cleaning up his loose plot ends.
They decided that Kurt would be the son of Mystique, but Mystique would
be his mother, not his father. The father, unrevealed, was implied to be
some nameless German baron. Rogue, as Mystique's foster daughter, is
thus Kurt's sister-by-law. It should be noted that the X-writers also
have had Sabretooth briefly be attached to Mystique, with the offspring
of that happy union being the nonpowered Graydon Creed, making him a
half-brother of Kurt.
All of the above was revealed in X-Men Unlimited #4, which is, quite
possibly, the single most ignorable comic book in recent history, and
thus highly suspect as a source of revelation on any subject. One hoped
future Marvel writers would ignore the "history" revealed in X-Men
Unlimited #4 just as blithely as X-Men Unlimited #4 ignored the history
it was built on.
Unfortunately, issues circa Uncanny X-Men #428 and following pick up
on that same storyline, exploring Kurt's parentage in "The Draco."
Now, apparently, count Christian Wagner and his wife (Mystique) wanted
children, but Christian was infertile. Mystique then proceededs to see
every available man in sight, as well as an in-vitro specialist, in
order to get herself pregnant. Eventually, she meets the perfect man,
has an affair, gets pregnant, and then realizes that the father of her
child is Azazel, a red-skinned, pointy-eared guy who hails from "La
Isla des Demonas" and has his own plans for the infant. Picking up from
the events of Unlimited #4, Mystique gives birth, is pursued by a lynch
mob, chucks the baby off a cliff, and doesn't notice when baby Kurt is
There are still numerous issues left to this storyline, and it's not
expected that it will make the best sense, but after all this time the
answer seems to be in front of us. Meanwhile, in summary: Mystique and
Azazel are Kurt's parents, making Rogue his foster sister and Graydon
creed his half-brother (via Sabretooth).