Lord North was born in London on 13 April 1732, at the family house at Albemarle Street, just off Piccadilly, though he spent much of his youth at Wroxton Abbey in Oxfordshire. North's strong physical resemblance to George III suggested to contemporaries that Prince Frederick might have been North's real father (and North the King's brother), a theory compatible with the Prince's reputation but supported by little real evidence. His father, the first Earl, was at the time Lord of the Bedchamber to Prince Frederick, who stood as godfather to the infant.

North was descended from the 1st Earl of Sandwich and was related to Samuel Pepys and the 3rd Earl of Bute. He at times had a slightly turbulent relationship with his father Francis North, 1st Earl of Guilford, yet they were very close. In his early years the family was not wealthy, though their situation improved in 1735 when his father inherited property from his cousin. Frederick's mother, Lady Lucy Montagu, died in 1734. His father remarried, but his stepmother, Elizabeth North, died in 1745, when Frederick was thirteen. One of his stepbrothers was Lord Dartmouth, who remained a close friend for life.

He was educated at Eton College between 1742 and 1748, and at Trinity College, Oxford, where in 1750 he was awarded an MA. After leaving Oxford he travelled in Europe on the Grand Tour with Dartmouth, visiting Leipzig. He visited Vienna, Milan, and Paris, returning to England in 1753.

On 15 April 1754, North, then twenty-two, was elected unopposed as the Member of Parliament for the constituency of Banbury, He served as an MP from 1754 to 1790 and joined the government as a junior Lord of the Treasury on 2 June 1759 during the Pitt–Newcastle ministry (an alliance between the Duke of Newcastle and william Pitt the Elder). He soon developed a reputation as a good administrator and parliamentarian, and was generally liked by his colleagues. Although he initially considered himself a Whig, he did not closely align with any of the Whig factions in Parliament and it became obvious to many contemporaries that his sympathies were largely Tory.

On 20 May 1756 Lord North married Anne Speke (before 1741 – 1797), daughter of George Speke MP, of Whitelackington in Somerset. She was the sole heiress of the Devonshire estates of the Drake family of Ash, which subsequently were sold piecemeal by Lord North. By Anne he had six children:

In November 1763 he was chosen to speak for the Government concerning radical MP John Wilkes. Wilkes had made a Savage attack on both the Prime Minister and the King in his newspaper The North Briton, which many thought libelous. North's motion that Wilkes be expelled from the House of Commons passed by 273 votes to 111. Wilkes' expulsion took place in his absence, as he had already fled to France following a duel.

When a government headed by the Whig magnate Lord Rockingham came to power in 1765, North left his post and served for a time as a backbench MP. He turned down an offer by Rockingham to rejoin the government, not wanting to be associated with the Whig grandees that dominated the Ministry.

He returned to office when Pitt returned to head a second government in 1766. North was appointed Joint Paymaster of the Forces in Pitt's ministry and became a Privy Counsellor. As Pitt was constantly ill, the government was effectively run by the Duke of Grafton, with North as one of its most senior members.

In December 1767, he succeeded Charles Townshend as Chancellor of the Exchequer. With the resignation of the secretary of state Henry Seymour Conway in early 1768, North became Leader of the Commons as well. He continued to serve when Pitt was succeeded by Grafton in October.

North's ministry had an early success during the Falklands Crisis in 1770 in which Great Britain faced down a Spanish attempt to seize the Falkland islands, nearly provoking a war. Both France and Spain had been left unhappy by Great Britain's perceived dominance following the British victory in the Seven Years War. Spanish forces seized the British settlement on the Falklands and expelled the small British garrison. When Britain opposed the seizure, Spain sought backing from her ally, France. However, Louis XV did not believe his country was ready for war and in the face of a strong mobilisation of the British fleet the French compelled the Spanish to back down. Louis also dismissed Choiseul, the hawkish French Chief Minister, who had advocated war and a large invasion of Great Britain by the French.

Most of North's government was focused first on the growing problems with the American colonies and later on conducting the American War of Independence which broke out in 1775, beginning with the Battle of Lexington. Following the Boston Tea Party in 1773, Lord North proposed a number of legislative measures which were supposed to punish the Bostonians. These measures were known as the Coercive Acts in Great Britain, while dubbed the Intolerable Acts in the colonies. By shutting down the Boston government and cutting off trade, he hoped it would keep the peace and dispirit the rebellious colonists. Instead, the acts further inflamed Massachusetts and the other colonies, eventually resulting in open war during the Boston campaign. North deferred overall strategy of the war to his key subordinates Lord George Germain and the Earl of Sandwich. Despite a series of victories and the capture of New York and Philadelphia the British were unable to secure a decisive victory. In 1778 the French allied themselves with the American rebels, and Spain joined the war in 1779 as an ally of France, followed by the Dutch Republic in 1780. The British found themselves fighting a global war on four continents without a single ally. After 1778 the British switched the focus of their efforts to the defense of the West Indies, as their sugar wealth made them much more valuable to Great Britain than the Thirteen Colonies. In 1779 Great Britain was faced with the prospect of a major Franco-Spanish invasion, but the Armada of 1779 was ultimately a failure. Several peace initiatives fell through, and an attempt by Richard Cumberland to negotiate a separate peace with Spain ended in frustration.

The country's problems were added to by the First League of Armed Neutrality, which was formed to counter the British blockade strategy, and threatened British naval supplies from the Baltic. With severe manpower shortages, North's government passed an act abandoning previous statutes placing restrictions on Catholics serving in the military. This provoked an upsurge of anti-Catholic feelings and the formation of the Protestant Association leading to the Gordon Riots in London in June 1780. For around a week the city was in the control of the mob, until the military was called out and martial law imposed. In spite of these problems Great Britain's fortunes in the war in America had temporarily improved, following the failure of a Franco-American attack on Newport and the prosecution of a Southern Strategy which saw Great Britain capture Charleston and its garrison. During 1780 and 1781 the North government gained strength in the House of Commons.

When British forces under Lord Cornwallis surrendered at the conclusion of the October 1781 Siege of Yorktown, North wrote despairingly in his journal, "Oh my God! It's all over."

In April 1782 it was suggested in cabinet by Lord Shelburne that North should be brought to public trial for his conduct of the American War, but the prospect was soon abandoned. Ironically, in 1782 the war began to turn in Great Britain's favour again through naval victories, owing largely to policies adopted by Lord North and the Earl of Sandwich. The British naval victory at the Battle of the Saintes took place after the government's fall. Despite predictions that Gibraltar's fall was imminent, that fortress managed to hold out and was relieved. Great Britain was able to make a much more favourable peace in 1783 than had appeared likely at the time when North had been ousted. In spite of this North was critical of the terms agreed by the Shelburne government which he felt undervalued the strength of the British negotiating position.

In April 1783, North returned to power as Home Secretary in an unlikely coalition with the radical Whig leader Charles James Fox known as the Fox–North Coalition under the nominal leadership of the Duke of Portland. King George III, who detested the radical and republican Fox, never forgave this supposed betrayal, and North never again served in government after the ministry fell in December 1783. One of the major achievements of the coalition was the signing of the Treaty of Paris which formally ended the American War of Independence.

North was an active speaker until he began to go blind in 1786. He succeeded his father as 2nd Earl of Guilford on 4 August 1790 and entered the House of Lords, by which time he had entirely lost his sight. Lord Guilford died in London and was buried at All Saints' Church, Wroxton (Oxfordshire) near his family home of Wroxton Abbey. His son George North, Lord North, took over the constituency of Banbury, and in 1792 acceded to his father's title. Wroxton Abbey is now owned by Fairleigh Dickinson University, ironically an American college, and the modernised abbey serves as a location for American students to study abroad in England.

The British government's prestige and popularity were enormously boosted by the incident. They had successfully managed to drive a wedge between France and Spain, and demonstrated the power of the Royal Navy – although it was suggested by critics that this gave Lord North a level of complacency and an incorrect belief that the European powers would not interfere in British colonial affairs. This was contrasted with the previous administration's failure to prevent France from annexing the Republic of Corsica, a British ally, during the Corsican Crisis two years earlier. Using his newly found popularity, North took the chance to appoint Lord Sandwich to the cabinet as First Lord of the Admiralty.

A preserved 18th-century door on display in Edinburgh Castle shows a hangman's scaffold labelled "Lord Nord" carved by a prisoner captured during the American War of Independence.