She was born an only child in Seattle, Washington. Her father was an editor and moved the family to San Francisco when she was a young child. She went to school at Aptos Junior High School, where she met an Armenian-American man named Harry Kullijian with whom she fell in love. They lost touch when she went to Lowell High School in San Francisco. When she left home to attend Bennington College in Vermont, her mother informed her that her father, a journalist who she had believed was born in Rhode Island, was actually a light-skinned man of half German American and half African American descent, born in Augusta, Georgia, who had passed for white, saying that the only reason she was telling her was so she wouldn't be surprised "if she had a black baby". She kept her heritage secret so she would not be typecast on Broadway and in Hollywood, ultimately revealing it only in her autobiography, Just Lucky I Guess, which was published in 2002, when she was more than 80 years old.

Her first Broadway play was Let's Face It, where she was an understudy for Eve Arden. She had a featured role in a review, Lend an Ear, where she was spotted by Anita Loos and cast in the role of Lorelei Lee, which was to bring her to prominence. (Her signature song from the production was "Diamonds Are a Girl's Best Friend.") Carol's persona and that of the character were strikingly alike: simultaneously smart yet scattered, naïve but worldly.

She came to national prominence as the star of Jerry Herman's Hello, Dolly! She never missed a performance during her run, attributing her good health to her Christian Science faith. Her performance won her the Tony Award for Best Actress in a Musical, in a year when her chief competition was Barbra Streisand for Funny Girl. She was deeply disappointed when Streisand, who many believed to be far too young for the role, successfully campaigned to play the role of Dolly Levi in the film, which also starred Walter Matthau and Michael Crawford. (Channing was probably comforted to know that few who had seen her on stage were impressed by Streisand's interpretation of the role, a combination of Jewish yenta and Mae West.)

She reprised the role of Lorelei Lee in the musical Lorelei, and appeared in two New York revivals of Hello, Dolly!, in addition to touring with it extensively throughout the United States.

In 1966 she won the Sarah Siddons Award for her work in Chicago theatre. She was nominated for the Academy Award for Best Supporting Actress for her performance in Thoroughly Modern Millie, opposite Julie Andrews and Mary Tyler Moore.

She married four times. Her first husband, Theodore Naidish, was a writer; her second, Alexander Carson, was center for the Ottawa Rough Riders Canadian football team (they had one son, Channing Lowe, who is a cartoonist and who took his step-father's surname). In 1956 she married her manager and publicist Charles Lowe. They remained married for 42 years, but she abruptly filed for divorce in 1998, alleging that she and Lowe had not had marital relations in many years and only twice in that timespan; she also alleged that Lowe was gay, a fact she evidently did not realize when they wed, but he denied her allegations. He died before the divorce was finalized.

On May 10, 2003, she married Harry Kullijian, her fourth husband and her old junior high school sweetheart, who reunited with her after she mentioned him fondly in her memoir. At Lowell High School, her old school, they renamed the school's auditorium "The Carol Channing Theatre" in honor of her. On February 25, 2002, the City of San Francisco, California proclaimed it was Carol Channing Day, possibly for her advocacy of gay rights and her appearance one year as the celebrity host of the Gay Pride Day festivities in Hollywood.

Her autobiography entitled "Just Lucky I Guess" was released on October 8, 2002. In her memoirs, Channing reveals her "long kept secret" that she has African American ancestry, through her father, George Channing, who she claims was a light-skinned African-American who kept his racial identity a secret, understandably considering the treatment of that community in those days, even in a state like Washington.

Carol Channing has a star on the Hollywood Walk of Fame at 6233 Hollywood Boulevard.

The New York Times reported on June 27, 1973 that Carol Channing had been included on Nixon's Enemies List.

Her voice and mannerisms have been parodied a number of times on the improv comedy show Whose Line Is It Anyway?, especially by Ryan Stiles, and on Family Guy, where she is portrayed boxing Mike Tyson and eventually defeating him.

Channing was parodied by the cast of the Off-Broadway cast Forbidden Broadway on repeated occasions, and appeared on the cast's third album, Forbidden Broadway, Vol. 3, asking the cast for instructions on how to properly do a Carol Channing impression.