Peale was born in 1741 in Chester, Queen Anne's County, Maryland, the son of Charles Peale and his wife Margaret. He had a younger brother, James Peale (1749-1831). Charles became an apprentice to a saddle maker when he was thirteen years old. Upon reaching maturity, he opened his own saddle shop; however, when his Loyalist creditors discovered he had joined the Sons of Liberty, they conspired to bankrupt his business.

Peale's enthusiasm for the nascent national government brought him to the capital, Philadelphia, in 1776, where he painted portraits of American notables and visitors from overseas. His estate, which is on the campus of La Salle University in Philadelphia, can still be visited. He also raised troops for the War of Independence and eventually gained the rank of captain in the Pennsylvania militia by 1776, having participated in several battles. While in the field, he continued to paint, doing miniature portraits of various officers in the Continental Army. He produced enlarged versions of these in later years. He served in the Pennsylvania state assembly in 1779-1780, after which he returned to painting full-time.  Peale was quite prolific as an artist. While he did portraits of scores of historic figures (such as James Varnum, Benjamin Franklin, John Hancock, Thomas Jefferson, and Alexander Hamilton), he is probably best known for his portraits of George Washington. The first time Washington sat for a portrait was with Peale in 1772, and they had six other sittings; using these seven as models, Peale produced altogether close to 60 portraits of Washington. In January 2005, a full-length portrait of Washington at Princeton from 1779 sold for $21.3 million, setting a record for the highest price paid for an American portrait.  One of his most celebrated paintings is The Staircase Group (1795), a double portrait of his sons Raphaelle and Titian, painted in the trompe l'oeil style. It is in the collection of the Philadelphia Museum of Art.

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He produced enlarged versions of these in later years.