Born in the small rural town of Taumarunui in the central North Island of New Zealand, Rupe had twelve siblings. She relocated to the urban centres of Auckland and Wellington. After doing drag performances while doing compulsory military training and periods working as a nurse and waiter, Rupe moved to Sydney's Kings Cross in the late 1950s.
Taking the name of Dorothy Dandridge's role in Carmen Jones, Rupe became Australia's first Māori drag performer and from that time on lived as a woman. A whole range of work followed, including snake-work, hula dancing and prostitution. Carmen never formally worked at Les Girls but over the years did some extremely exciting, well received guest spots. She described how local police treated her: I was locked up in Long Bay about a dozen times. But it made me a stronger person today. An arrest in New Zealand failed to produce a conviction, because drag was legal there, unlike in Australia.
In 1988 an autobiography was published, outlining her escapades "from school boy to successful business woman"."Having A Ball: My Life" was written with Paul Martin and published by Benton Ross. ISBN 9780908636433
In Wellington Carmen ran Carmen's International Coffee Lounge and the Balcony strip club. Despite the fact that the law criminialised homosexual acts, Carmen challenged the overt discrimination and prejudice against people in the gay and transgender communities. She was not afraid to speak to the press and was summoned to appear before the Privileges Committee by Prime Minister Robert Muldoon for suggesting some MPs were gay or bisexual.
In 1977 she ran for the Wellington mayoralty, with the support of local businessman Sir Bob Jones, with the slogans get in behind and Carmen for mayor and a platform of gay marriage and legalised brothels, though neither of these are local-government matters in New Zealand. Michael Fowler won re-election as Mayor.
Rupe returned to Surry Hills, Sydney where she lived the remainder of her life. In 2003 she was inducted into the Variety Hall of Fame. In 2008 she rode her mobility scooter topless at the head of the Decade of the Divas float at the Gay and Lesbian Mardi Gras. She was a prominent member of Agender, the New Zealand transgender group.
Rupe died in St Vincent’s Hospital, Sydney of kidney failure on 15 December 2011 after a fall and hip surgery earlier in the year, she was 75.
Rupe has been cited as a role model by MP Georgina Beyer, the world's first openly transsexual Member of Parliament. Long time friend and ex Grey District Councilor Jacquie Grant MNZM wrote this moving tribute for Carmen and at her Tangi delivered an equally moving Eulogy. .
The Carmen Rupe Memorial Trust was established in Sydney to perpetuate Carmen's legacy as a TransTasman GLBTI cultural icon through charitable work and community service.
In a heartfelt tribute, Sydney Mayor Clover Moore stated that "Carmen Rupe was an icon for Sydney's Transgender community and a tireless advocate for GLBT rights. She was a quiet achiever who spent decades as a volunteer with many organisations who provided support to some of our cities most vulnerable people .I knew Carmen and was saddened by her passing. She will be missed by the people she touched and the community she was such a strong part of. It is heartening that, in accordance with her wishes, the Carmen Rupe Memorial Trust has been established to raise awareness of some of the issues faced by our GLBT community. This is a fitting tribute to someone who dedicated so much of their life to helping others"
Wellington Mayor Celia Wade-Brown supports erecting a statue of Rupe in Wellington: "I admired her strength in living her life on her terms and standing up against discrimination."
Four sets of traffic lights along Cuba Street in Wellington's central business district are fitted with green pedestrial lights depicting Rupe. The lights were installed in August 2016 to coincide with the 30th anniversary of the Homosexual Law Reform Act.