Born in Greenville, South Carolina, Townes was educated at Furman and Duke universities in his home state and at the California Institute of Technology, where he obtained his PhD in 1939. He worked at the Bell Telephone Laboratories (1939–47) before he took up an appointment at Columbia University, New York, where he became a full professor in 1950. He moved to the Massachusetts Institute of Technology in 1961 and then served as professor of physics at the University of California at Berkeley from 1967 until 1986.

In 1953 Townes designed the first maser (microwave amplification by stimulated emission of radiation). The maser works on the realization in quantum theory that molecules can only adopt a certain number of discrete characteristic energy states and that in their movement from one energy level to another they emit or absorb precisely determined amounts of radiation. Townes knew that the ammonia molecule (NH₃) could occupy one of two energy levels, the difference between them equaling a particular energy of a photon.

The question Townes went on to ask is, what happens if the ammonia molecule absorbs the photon of the appropriate frequency while it is at its higher energy level? Albert Einstein had answered the question in 1917 and shown that the molecule would fall to its lower state emitting a photon of the same frequency. There would then in fact be two photons of the right frequency to repeat the process and produce four photons. This is a rapid and powerful amplification producing a narrow beam of radiation with a single frequency. In this case the radiation emitted would have a frequency of 1.25 centimeters and thus fall in the microwave band, hence the name maser.

In any normal sample of ammonia only a few of the molecules would be in the higher energy state. Townes's problem was to devise a technique for the separation of molecules of the higher energy level (‘population inversion’) and he did this using a nonuniform electric field; molecules in the higher state were repelled and focused into the resonator while those in the lower state were attracted to it. By 1953 Townes had a working model of a maser.

Masers quickly found use in atomic clocks, receivers in radio telescopes, and numerous other uses. The maser led to the development of the laser, where light is amplified rather than microwave radiation and which was known in its earlier days as an ‘optical maser’. Townes, in fact, published a paper with A. L. Schawlow in 1958 showing the theoretical possibility of the laser. He was, however, beaten in the race to construct it by Theodore Maiman in 1960.

For his work on the maser Townes shared the 1964 Nobel Prize for physics with the Russians Nicolai Basov and Aleksandr Prokhorov, who had independently produced a maser in the Soviet Union in 1955.