Lee was born in Cheshire, England, the son of General John Lee and Isabella Bunbury (daughter of Sir Henry Bunbury, 3rd Baronet). He was sent to school in Switzerland and became proficient in several languages. He returned to England in 1746 at the age of fourteen to attend grammar school at Bury St Edmunds. That same year his father, then colonel of the 55th Foot (later renumbered the 44th), purchased a commission for Charles as an ensign in the same regiment.
Lee purchased a captain's commission in the 44th in 1756. The following year he took part in an expedition against the French fortress of Louisbourg, and in 1758 he was wounded in a failed assault on Fort Ticonderoga. After recovering, he took part in the capture of Fort Niagara in 1759 and Montreal in 1760. Lee went back to Europe, transferred to the 103rd Foot as a major, and served as a lieutenant colonel in the Portuguese army, fighting against the Spanish invasion of Portugal (1762). He returned to England in 1763 at the end of the Seven Years' War. His regiment was disbanded and he was retired as a major.
In 1765 he fought in Poland, serving as an aide-de-camp under King Stanislaus II. After many adventures he came home to England. Unable to secure promotion in the British Army, in 1769 he returned to Poland and saw more action, and lost two fingers in a duel in which he killed his opponent. Returning to England once again, he found that he was sympathetic to the American colonists in their quarrel with Britain. He moved to the colonies in 1773 and purchased an estate in Virginia, in an area now part of West Virginia, which he named Prato Rio.
Lee also received various other titles: in 1776, he was named Commander of the so-called Canadian Department, although he never got to serve in this capacity. Instead, he was appointed as the first Commander of the Southern Department. He served in this post for six months, until he was recalled to the main army.
Toward the end of 1776, Lee's animosity for Washington began to show. During the retreat from Forts Washington and Lee, he dawdled with his army, and intensified a letter campaign to convince various Congress members that he should replace Washington as Commander-in-Chief. Around this time, Washington was accidentally given and opened a letter from Lee to a Colonel Reed, in which Lee condemned Washington's leadership and abilities, and blamed Washington entirely for the dire straits of the Army. Though he was the victim of the letter, Washington wasn't angry. He was suspicious and disappointed at both Lee and himself, for he (Washington) was a man that took too much responsibility and not enough credit for himself. He sent the letters to Reed and wrote an accompanying letter apologizing for the mistake. Although his army was supposed to join that of Washington's in Pennsylvania, Lee set a very slow pace. On the night of December 12, Lee and a dozen of his guard inexplicably stopped for the night at White's Tavern in Basking Ridge, New Jersey, some three miles from his main army. The next morning, a British patrol of two dozen mounted soldiers found Lee writing letters in his dressing gown, and they captured him. Among the members of the British patrol was Banastre Tarleton. Lee was eventually recouped by the colonial forces in an exchange for General Richard Prescott.
Lee is most notorious for his actions during the Battle of Monmouth. Washington needed a secondary commander to lead the frontal assault. He unwillingly chose to put Lee in charge as he was the eldest of his generals. Washington ordered him to attack the retreating enemy, but instead, Lee ordered a retreat. He retreated directly into Washington and his troops, who were advancing, and Washington dressed him down publicly. Lee responded with "inappropriate language," was arrested, and shortly thereafter court-martialed. Lee was found guilty, and he was relieved of command for a period of one year.
It is not clear that Lee had made a bad strategic decision: he believed himself outnumbered (He was: British commander Sir Henry Clinton had 10,000 troops to Lee's 5,440.), and that a retreat was reasonable. However he disobeyed his orders, and he publicly expressed disrespect to his Commander-in-Chief. Plus, Washington wanted to test the abilities of his troops that were officially trained for the first time in European tactics by Friedrich Wilhelm Ludolf Gerhard Augustin von Steuben, commonly known as Baron von Steuben.
Lee tried to get Congress to overturn the court-martial's verdict, and when this failed, he resorted to open attacks on Washington's character. Lee's popularity plummeted then. The Colonel John Laurens, an aide to Washington, challenged him to a duel, one in which Lee was wounded in his side. He was released from duty on January 10, 1780. He retired to Philadelphia, Pennsylvania, where he died.
Treachery may have been the reason for Lee's retreat at the Battle of Monmouth. While Lee had been held prisoner by the British General Sir William Howe, 5th Viscount Howe in March, 1777, Lee drafted a plan for British military operations against the Americans. At the time, Lee was under a threat of being tried as a deserter from the British Army, because he hadn't resigned his British commission as Lieutenant-Colonel until several days after he accepted an American commission. The plan in Lee's handwriting was found in the Howe family archives in 1857.