Charlotte Rae was born Charlotte Rae Lubotsky in 1926, in Milwaukee, Wisconsin, the middle daughter of three sisters, between Beverly and Mimi. Her parents, Esther (nee Ottenstein) and Meyer Lubotsky, were Russian Jewish immigrants. Her father owned an automobile tire business. Her mother had been a childhood friend of Milwaukee-reared Golda Meir, future Prime Minister of Israel.

Rae wanted to be a dramatic actress, but eventually wound up being a comedienne, all because of her stand-up comedy routines. Her family moved to the village of Shorewood, Wisconsin (Milwaukee County) in 1936. After graduating from Shorewood High School, she attended Northwestern University, where she met future actress Cloris Leachman; the two would be lifelong friends. She dropped out of college and moved to New York City, and began a career as a stage actress, performing in such plays as "Pickwick", for which she was nominated in 1966 for Best Featured Actress in a Musical, and, in 1969, for Best Actress in a Play for "Morning, Noon and Night". She co-starred with Fred Gwynne and Al Lewis in Car 54, Where Are You? (1961). She would live there until 1974 when she moved to Southern California.

She was nominated for an Emmy Award for her supporting role in Queen of the Stardust Ballroom (1975). After guest-starring on numerous shows, including Norman Lear's All in the Family (1971) and Good Times (1974), Lear hired her old friend to co-star on Diff'rent Strokes (1978) as Gary Coleman's housekeeper, "Edna Garrett". Within a year, she gained popularity with her character, which eventually led her to having her own series, The Facts of Life (1979). Between Norman Lear and NBC, they gave her the green-light to star in her own show, which focused primarily on the housekeeper of an all-girls school. The spinoff series featured newcomers including Kim Fields as "Tootie" and Lisa Whelchel as rich spoiled brat "Blair Warner".

Before then, she approached young Mindy Cohn at Westlake School in Los Angeles, and suggested that she take the role of smart "Natalie Green", a character Rae created for her and named after one of her best friends from high school. Cohn stayed on the show for eight seasons. Rae left the show in 1986 reportedly owing to a health issue. She reportedly created the role of "Beverly" for her old friend, Cloris Leachman, to play on The Facts of Life (1979) after she left the show.

She returned to the stage. In 1992, she was the voice of "Aunt Christine Figg" in Tom and Jerry: The Movie (1992) and appeared in "The Vagina Monologues" in New York. In 2000, she starred as "Berthe" in the Paper Mill Playhouse production of "Pippin". In 2007, she appeared in a cabaret show at the Plush Room in San Francisco for several performances. In the 2008 movie, You Don't Mess with the Zohan (2008), she played a mature woman who has a fling with Adam Sandler's character. On February 18, 2009, she appeared in a small role as "Mrs. Ford" on the "I Heart Mom" episode.

Rae's older sister, Beverly, died from pancreatic cancer in 1998, while Rae's ex-husband of 35 years, John Strauss, died in 2011, following a long battle with Parkinson's disease. A pancreatic cancer survivor, Rae continued to act while making guest appearances everywhere, especially TV Land, where her show, The Facts of Life (1979), won the 2011 award for Pop Culture Icon.

Charlotte Rae died on August 5, 2018 at her home in Los Angeles, aged 92, from bone cancer, which had been diagnosed a year earlier. She also suffered from asthma and scoliosis, and had been fitted with a pacemaker.