Fred C. Koch was born in Quanah, Texas, the son of a Dutch immigrant, Harry Koch, who owned the Tribune-Chief newspaper. He attended Rice Institute in Houston from 1917 to 1919, and graduated from the Massachusetts Institute of Technology (MIT) in 1922, where he obtained a degree in Chemical Engineering Practice.

Koch started his career with the Texas Company in Port Arthur, Texas, and later became chief engineer with the Medway Oil & Storage Company on the Isle of Grain in Kent, England. In 1925 he joined a fellow MIT classmate, P.C. Keith, at Keith-Winkler Engineering in Wichita, Kansas. Following the departure of Keith in 1925, the firm became Winkler-Koch Engineering Company.

In 1927, Koch developed a more efficient thermal cracking process for turning crude oil into gasoline. The process threatened the competitive advantage of established oil companies, and Koch and its customers were sued for patent infringement. Although the firm eventually won all of these lawsuits, this litigation effectively put Winkler-Koch out of business in the U.S. for several years. Koch turned his focus to foreign markets, including the Soviet Union, where Winkler-Koch built 15 cracking units between 1929 and 1932. The company also built installations in countries throughout Europe, the Middle East and Asia.

Koch joined new partners in 1940 to create the Wood River Oil and Refining Company, which is today known as Koch Industries. In 1946 the firm acquired the Rock Island refinery and crude oil gathering system near Duncan, Oklahoma. Wood River was later renamed the Rock Island Oil and Refining Company. In 1966 he turned over day-to-day management of the company to his son, Charles Koch.

During his time in the Soviet Union, Koch came to despise communism and Josef Stalin's regime, writing in his 1960 book, A Business Man Looks at Communism, that he found the Soviet Union to be "a land of hunger, misery, and terror." Fred Koch was an early member of the John Birch Society, noting in his book Virtually every engineer he worked with [in the Soviet Union] was purged. According to Jane Mayer's article in The New Yorker, Koch "wrote admiringly of Benito Mussolini's suppression of Communists in Italy, and disparagingly of the American civil-rights movement.

Fred C. Koch married Mary Robinson in Kansas City, Missouri in 1932. They had four sons, Frederick (b. 1933), Charles (b. 1935), David (b. 1940) and William (b. 1940). For the ore/oil tanker named after Fred's wife, see Mary R. Koch.