Carlos was born in Ljubljana, the capital of Carniola in what is now Slovenia, the elder son of Juan, Count of Montizón and of his wife Archduchess Maria Beatrice of Austria-Este. As an infant the family lived briefly in London where Carlos' younger brother Alfonso was born. After their father, known too liberal for Carlist tastes, left their mother, the boys lived with their mother in Modena. Their mother's brother Duke Francis V of Modena was largely responsible for the education of the boys and was the chief influence in their early lives. Carlos was known for his traditionalist views, much different from those of his father.
On February 4, 1867, at Frohsdorf in Austria, Carlos married Princess Margarita of Bourbon-Parma, daughter of Duke Charles III of Parma and of his wife, Louise Marie Thérèse of France. The couple had five children:
Carlos organized and lead the Third Carlist War. Between 1872 and 1876 he effectively ruled much of Peninsular Spain.
In January 1893 Carlos' wife, Margarita, died. The following year he decided to remarry. He consulted his mother who suggested two ladies: Princess Theresia of Liechtenstein (daughter of Prince Alfred of Liechtenstein) and Princess Berthe of Rohan (daughter of Prince Alain of Rohan). Having met both ladies, Carlos decided on the latter and asked for her hand in marriage.
On April 28, 1894, Carlos and Berthe were married by Cardinal Schönborn in his private chapel in Prague. Berthe had a dominant personality, making the marriage very unpopular among Carlists. "All writers agree that this second marriage was disastrous, not only for the family of Don Carlos and for [Carlos] himself, but also for the [Carlist] party.