Educated at Harrow, he apprenticed as a director with J. Lyons and Company, and was a member of the Rosicrucian Order Crotona Fellowship. On the outbreak of the Second world war he was commissioned as an officer with the Catering Branch of the Royal Air Force, where he served from 1940 until 1955. From 1957 until 1961 he was manager of the Cluny Hill Hotel near Forres, Scotland.
During a period of unemployment from 1962 onwards, Peter Caddy began experimenting with Organic gardening to supplement his family's food supply. The garden near Findhorn, Scotland, flourished to such a remarkable extent that it eventually attracted national attention. Peter Caddy attributed its success to his spiritual practices, and a community began to form around his family and their friend Dorothy Maclean.
In 1979 Peter Caddy left the community he had founded. He died in a car crash in Switzerland in 1994.