Charles was born at Horton, in Northamptonshire, the son of Mr. George Montague, a younger son of the Earl of Manchester. He was educated first in the country, and then removed to Westminster, where, in 1677, he was chosen as a King's Scholar.
It was at this time he contracted a very intimate friendship with Mr. Stepney; and in 1682, when Stepney was elected at Cambridge, he asked to be moved to Cambridge in order to join his friend, without waiting for the advantages of another year.
His relation, Dr. Montagu, was then Master of the college in which he was placed, and took him under his wing. It was here that he began a lasting association with Isaac Newton. In 1685 Montagu's verses on the death of King Charles II of England made such an impression on the Earl of Dorset that he was invited to town, and introduced to other entertainments. In 1687 he joined with Prior in "The City Mouse and the Country Mouse," a burlesque of John Dryden's The Hind and the Panther. He signed the invitation to the Prince of Orange to become king, and sat in the Convention. At about the same time he married the Countess Dowager of Manchester, and intended taking holy orders; but changed his mind and purchased for 1,500 pounds a position as clerk of the Council.
In 1691, having become a member of the House of Commons, he argued in favour of a law to grant the assistance of counsel in trials for high treason; and becoming confused in the middle of his speech, recovered himself to observe, "how reasonable it was to allow counsel to men called as criminals before a court of justice, when it appeared how much the presence of that assembly could disconcert one of their own body."
After this he rose quickly, being made one of the Commissioners of the Treasury, and a member of the Privy Council. In 1694 he became Chancellor of the Exchequer; and the next year was involved in the successful recoinage project. In 1698, having been appointed to the first Commission of the Treasury, he was also one of the regency in the King's absence: the next year he was made Auditor of the Exchequer, and the year after created Baron Halifax. His impeachment by the Commons failed, when the Articles were dismissed by the House of Lords.
On the accession of Queen Anne he was dismissed from the Council; and in the first Parliament of her reign was again attacked by the Commons, and again escaped by the protection of the Lords. In 1704 he wrote an answer to Bromley's speech against occasional conformity. He headed the inquiry into the danger of the Church. In 1706 he proposed and negotiated the Union with Scotland; and when the Elector of Hanover received the Garter, after the Act had passed for securing the Protestant Succession, he was appointed to carry the ensigns of the Order to the Electoral Court. He sat as one of the judges of Henry Sacheverell, but voted for a mild sentence. Being now no longer in favour, he obtained a writ for summoning the Electoral Prince to Parliament as Duke of Cambridge.
At the Queen's death he was again appointed one of the regents; and at the accession of George I, was made Earl of Halifax, Knight of the Garter, and First Commissioner of the Treasury, with a grant to his nephew of the reversion of the Auditorship of the Exchequer. Shortly afterwards he died of an inflammation of his lungs.