Ames was born in Easton, Massachusetts, the son of Oliver Ames, a blacksmith who had built a business of making shovels and became nicknamed "King of Spades". In his youth, he obtained a public school education and later worked in the family workshops to learn each step of the manufacturing process. He eventually became a partner in the business, and with his brother Oliver Jr. he established the firm Oakes Ames & Sons. Driven by the settlement of the Midwest, as well as by the discovery of gold in California and Australia, the shovel manufacturing business was booming, and Ames made a large fortune from it.

He was influential in the establishment of Republican Party in Massachusetts. In 1860, he became a member of the executive council of Massachusetts, and from 1863 to 1873 he served as a U.S. Congressman from the 2nd District of Massachusetts. In Congress, he became a member of the committee on railroads during the early building of the transcontinental railroad. In 1865, President Lincoln appealed to him to take control of the Union Pacific portion of the project, which had become mired down because of the Civil War and had built only 12 miles of track.

Through his influence he obtained contracts for his family firm in the construction of the Union Pacific and staked nearly all the family's holdings as capitalization for the project. The contracts were later transferred to the Credit Mobilier Company of America after Ames ousted its founder Thomas Durant. His brother Oliver was appointed president of the Union Pacific in 1866. The railroad was completed in 1869. See Golden spike

In 1872, it was disclosed that Ames had sold shares in Credit Mobilier to fellow congressmen at a price greatly below the true value of the stock. The subsequent public scandal led to a House investigation, which formally recommended expulsion. On February 28, 1873, the House passed a resolution formally censuring Ames "in seeking to secure congressional attention to the affairs of a corporation in which he was interested, and whose interest directly depended upon the legislation of Congress, by inducing members of Congress to invest in the stocks of said corporation." Detractors referred to him as "Hoax Ames." Ames died soon afterward at North Easton, Massachusetts.

Many have since attributed the Congressional resolution against him to partisanship and the publicity of the scandal. In 1883, the state legislature of Massachusetts passed a resolution vindicating Ames. His son Oliver Ames was lieutenant-governor and governor of Massachusetts.

The contributions of Ames and his brother Oliver in the building of the Union Pacific are commemorated in the Oliver and Oakes Ames Monument at Sherman Summit, near Laramie, Wyoming, along the original route. The pyramidal monument was designed by famous architect Henry Hobson Richardson (who designed a number of projects for the Ames family) with sculpted plaques of the Ames brothers by Augustus Saint-Gaudens. At the time of its construction, the monument was located at the highest point attained by the Union Pacific's transcontinental route. With a change in the route of the railroad, the monument today is not on any major transportation route.