She was born the Honourable Caroline Ponsonby, and became Lady Caroline when her father succeeded to the earldom in 1793. As a small child she was considered delicate and for her health spent much time in the country, but from 1794 she lived at Devonshire House with her cousins: Lord Hartington (later the 6th Duke of Devonshire), Lady Georgiana, and Lady Harriet Cavendish; and two children of Lady Elizabeth Foster and the Duke of Devonshire. With these children she was educated at Devonshire House, and was particularly close during childhood to Lady Harriet, who was only three months older.

Lady Morgan reported in her memoirs that Lamb told her that she had grown up as a tomboy, and quite unable to read or write until adolescence. While many scholars have accepted this (and other melodramatic claims made by Lady Morgan) at face value, published works of correspondence about her family members make it extremely unlikely. The grandmother she shared with her Cavendish cousins, the formidable Dowager Lady Spencer, was zealously dedicated to promoting education, and later employed their governess as her own companion. This governess was Miss Selina Trimmer, who was the daughter of Mrs Sarah Trimmer, a well-known and respected author of moral tales for children. She taught them an extensive curriculum, considerably beyond mere literacy. There is a published letter Lamb wrote on 31 October 1796 (just before her eleventh birthday) that not only demonstrates her literacy, but also a merciless wit and talent for mimicry. Lamb was exceptionally well educated at home, and also attended a school in Hans Place, London. In her early adult years, she not only wrote prose and poetry, but also took to sketch portraiture. These courtly skills stood her in good stead. She spoke French and Italian fluently, was skilled at Greek and Latin, and also enjoyed music and drama.

In June 1805, at the age of nineteen, Lady Caroline married the Hon. William Lamb, an up-and-coming young politician, and heir to the 1st Viscount Melbourne. Although their meeting had been shrewdly orchestrated by William Lamb's mother, theirs was a love match. The couple had become "mutually captivated" during a visit to Brocket Hall in 1802 and for many years the pair enjoyed a happy marriage. Their union produced a son in 1807 and a premature daughter in 1809 who died within 24 hours. Lady Caroline was physically ill-suited to childbirth and suffered long recovery periods after each one. Her son was born with severe mental problems that may have been a type of autism. Although most aristocratic families sent mentally challenged relatives to institutions, the Lambs cared for their son at home until his death. The stress, combined with William Lamb's consuming career ambitions drove a wedge between the couple.

From March to August 1812, Lamb embarked on a well-publicized affair with Lord Byron. He was 24 and she 27. She had spurned the attention of the poet on their first meeting, subsequently giving Byron what became his lasting epitaph when she described him as "mad, bad, and dangerous to know." His response was to pursue her passionately.

Lamb and Lord Byron publicly decried each other as they privately pledged their love over the following months. Byron referred to Lamb by the hypocorism "Caro", which she adopted as her public nickname. After Byron broke things off, Lamb's husband took the disgraced and desolate Lamb to Ireland. The distance did not cool Lamb's interest in the poet; she and Byron corresponded constantly during her exile. When Lamb returned to London in 1813, however, Byron made it clear he had no intention of re-starting their relationship. This spurred what could be characterized as the first recorded case of celebrity stalking as she made increasingly public attempts to reunite with her former lover.

Lamb's obsession with Byron would define much of her later life and as well as influence both hers and Byron's works. They would write poems in the style of each other, about each other, and even embed overt messages to one another in their verse. After a thwarted visit to Byron's home, Lamb wrote "Remember Me!" into the flyleaf of one of Byron's books. He responded with the hate poem; "Remember thee! Remember thee!; Till Lethe quench life’s burning stream; Remorse and shame shall cling to thee, And haunt thee like a feverish dream! Remember thee! Ay, doubt it not. Thy husband too shall think of thee! By neither shalt thou be forgot, Thou false to him, thou fiend to me!"

Her cousin Harriet (by then Lady Granville), with whom Lamb's relationship had deteriorated after childhood, visited her in December 1816 and was so incredulous at her unrepentant behavior that she ended her description of the visit in a letter to her sister with: "I mean my visit to be annual."

Lamb's most famous work is Glenarvon, a Gothic novel that was released in 1816 just weeks after Byron's departure from England. Although published anonymously, Lamb's authorship was an open secret. It featured a thinly disguised pen-picture of herself and her former lover, who was painted as a war hero who turns traitor against the cause of Ireland. The book was notable for featuring the first version of the Byronic hero outside of Byron's own work as well as a detailed scrutiny of the Romantic Period and, more specifically, the Ton. Lamb included scathing caricatures of several members of those prominent society members. One of them, Lady Jersey, canceled Lamb's vouchers to Almack's in retribution for the Lamb's characterizations. This was the opening salvo in a backlash that found Lamb blackballed from fashionable society.

Byron responded to the novel; "I read Glenarvon too by Caro Lamb.God damn!" The book was a financial success that sold out several editions but was dismissed by critics as pulp fiction. However, later scholars like the philosopher Goethe deemed it worthy of serious literary consideration.

In 1819, Lamb put her ability to mimic Byron to use in the narrative poem "A New Canto." Years before, Lamb had impersonated Byron in a letter to his publishers in order to have them send her a portrait of Byron. It worked; the tone and substance of her request fooled them into sending the painting. She used that skill to respond to Byron's "Don Juan I and II". Lamb was most concerned with those allusions Byron had made about her; for example, the line "Some play the devil...and then write a novel” from "Don Juan II". In "A New Canto", Lamb wrote - as Byron - "I’m sick of fame; I’m gorged with it; so full I almost could regret the happier hour; When northern oracles proclaimed me dull." Byron never publicly responded to the poem. A reviewer of the time opined, in part; "The writer of this lively nonsense has evidently intended it as an imitation of Lord Byron. It is a rhapsody from beginning to end."

Lamb published three additional novels during her lifetime: Graham Hamilton (1822), Ada Reis (1823), and Penruddock (1823).

Byron's confidante and close friend was William Lamb's own mother, the colourful Lady Melbourne. Lady Melbourne had been instrumental in bringing about the politically advantageous marriage of her son to Lamb. However, once Lamb began her affair with Byron, her mother-in-law began a long and blatant campaign to rid her son of his wife. William Lamb refused to submit, and regretted that his mother had conspired against his wife with Byron. Calling Byron treacherous, William Lamb was supportive of Lamb to her death.

Ultimately, it was Lamb who prevailed on her husband to agree to a formal separation in 1825. Both parties had had numerous extramarital affairs by that time and Lamb had long been known to eschew duplicity. She took up permanent residence at Brocket Hall. Lamb's struggle with mental instability became more pronounced in her last years, complicated by her abuse of alcohol and laudanum. By 1827, she was under the care of a full-time physician as her body, which had always been frail, began to shut down. William Lamb was Chief Secretary for Ireland by that time and made a perilous crossing to be by her side when Lamb died on 25 January 1828.

In 1972, the film Lady Caroline Lamb was released to primarily critical reviews with Sarah Miles in the lead role. In 2003, the BBC released Byron [1] with Jonny Lee Miller in the title role and Camilla Power as Lady Caroline Lamb.