Townes was born in Greenville, South Carolina, the son of Henry Keith Townes (1876–1958), an attorney, and Ellen Sumter Townes (née Hard; 1881–1980). He earned his B.S. in Physics and B.A. in Modern Languages at Furman University, where he graduated during 1935. Townes completed work for the Master of Arts degree in physics at Duke University during 1937, and then began graduate school at the California Institute of Technology, from which he received a Ph.D. degree during 1939. During World War II he worked on radar bombing systems at Bell Labs.

Townes married Frances H. Brown, an Activist for the homeless, during 1941. They lived in Berkeley, California and had four daughters, Linda Rosenwein, Ellen Anderson, Carla Kessler, and Holly Townes.

Townes was appointed Professor during 1950 at Columbia University. He served as Executive Director of the Columbia Radiation Laboratory from 1950 to 1952. He was Chairman of the Physics Department from 1952 to 1955.

During 1951 he conceived a new way to create intense, precise beams of coherent radiation, for which he invented the acronym maser (for Microwave Amplification by Stimulated Emission of Radiation). When the same principle was applied to higher frequencies, the term laser was used (the word "light" substituting for the word "microwave").

During 1953, Townes, James P. Gordon, and H. J. Zeiger built the first ammonia maser at Columbia University. This device used stimulated emission in a stream of energized ammonia molecules to produce amplification of microwaves at a frequency of about 24.0 gigahertz.

From 1959 to 1961, he was on leave of absence from Columbia University to serve as Vice President and Director of Research of the Institute for Defense Analyses in Washington, D.C., a nonprofit organization, which advised the U.S. government and was operated by eleven universities. Between 1961 and 1967 Townes served as both Provost and Professor of Physics at the Massachusetts Institute of Technology. Then, during 1967, he was appointed as a Professor of Physics at the University of California at Berkeley, where he remained for almost 50 years; his status was as professor emeritus by the time of his death during 2015. Between 1966 and 1970, he was chairman of the NASA Science Advisory Committee for the Apollo lunar landing program.

For his creation of the maser, Townes along with Nikolay Basov and Alexander Prokhorov received the 1964 Nobel Prize in Physics. Townes also developed the use of masers and lasers for astronomy, was part of a team that first discovered complex molecules in space, and determined the mass of the supermassive black hole at the centre of the Milky Way galaxy.

When Townes failed to be promoted to President of MIT during 1967, he accepted an offer from Clark Kerr to join the University of California at Berkeley and begin an astrophysical program. Townes soon began searching for molecules in space. At the time most astronomers thought that molecules could not exist in space because ultraviolet rays would destroy them. Townes eventually discovered ammonia and water in dust clouds, which shielded them from damaging rays, by essentially doing microwave spectroscopy on the sky. This created the topic of molecular/millimeter astronomy, which continues to find many complex molecules, some the precursors to life.

The center of the Milky Way had long puzzled astronomers, and thick dust obscures the view of it in visible light. During the mid to late 1970s, Townes together with Eric Wollman, John Lacy, Thomas Geballe and Fred Baas studied Sagittarius A, the H II region at the galactic center, at infrared wavelengths. They observed ionized neon gas swirling around the center at such velocities that the mass at the very center must be approximately equal to that of 3 million suns. Such a large mass in such a small space implied that the central object (the radio source Sagittarius A*) contains a supermassive black hole. Sagittarius A* was one of the first black holes detected; its mass has been more accurately determined to be 4.3 million solar masses.

During 2002–2003, Townes served as a Karl Schwarzschild Lecturer in Germany and the Birla Lecturer and Schroedinger Lecturer in India.

A religious man and a member of the United Church of Christ, Townes believed that "science and religion [are] quite parallel, much more similar than most people think and that in the long run, they must converge". He wrote in a statement after winning the Templeton Prize during 2005: "Science tries to understand what our universe is like and how it works, including us humans. Religion is aimed at understanding the purpose and meaning of our universe, including our own lives. If the universe has a purpose or meaning, this must be reflected in its structure and functioning, and hence in science."

Townes died at the age of 99 in Oakland, California, on January 27, 2015. "He was one of the most important experimental physicists of the last century," Reinhard Genzel, a professor of physics at Berkeley, said of Townes. "His strength was his curiosity and his unshakable optimism, based on his deep Christian spirituality."