Posey was born near Woodville, Mississippi, the fourth of eight children of planter John Brooke Posey and Elizabeth Screven Posey. He attended the common schools and then graduated from college in Jackson, Mississippi, before studying law at the University of Virginia. He returned to his family's plantation and later established a law practice in Woodville. He married Mary Collins in May 1840 and they had two sons. However, Mary Posey died four years later.
When the Mexican-American War erupted, Posey was commissioned a first lieutenant in the 1st Mississippi Rifles, a volunteer regiment commanded by future Confederate President Jefferson Davis. Posey fought at the Battle of Buena Vista, where he was wounded.
Returning to Woodville after the war, Posey married Jane White in February 1849. They would eventually have six children. U.S. President James Buchanan appointed Posey as the district attorney for southern Mississippi, a post he held when the state seceded from the Union.
Posey recruited a local militia company, the Wilkinson Rifles, and enlisted them into Confederate service, serving as their captain from May 21, 1861. They became part of the 16th Mississippi, with Posey being selected as the regiment's first colonel on June 4. Not long afterward, Posey saw his first action of the war in a skirmish near Corinth, Mississippi. He and his men were transferred to the Eastern Theater in August 1861.
Posey suffered a slight wound at the Battle of Cross Keys during Major General Stonewall Jackson's Valley Campaign in June 1862. His regiment fought through the Seven Days Battles with the Army of Northern Virginia under General Robert E. Lee. He served as the temporary commander of the brigade of four Mississippi infantry regiments, commanded by Brigadier General Winfield S. Featherston, during the Northern Virginia Campaign and the Maryland Campaign. Posey's regiment fought at Fredericksburg in December 1862, successfully repelling a Union attack. In the spring of 1863, Posey was promoted to Brigadier General with date of rank of November 1, 1862.
The following May, Posey's Brigade saw limited action at the Battle of Chancellorsville, maintaining a reserve position at Salem Church. During the army reorganization following Stonewall Jackson's death, Posey's Brigade was assigned to Major General Richard H. Anderson's division of the Third (A.P. Hill's) Corps. During the Battle of Gettysburg in July, the brigade was part of Anderson's July 2 attack on Cemetery Ridge, conducting a "feeble, disjointed attack that was repulsed."
During the fall campaign, Posey was wounded in the left thigh by a shell fragment at the Battle of Bristoe Station on October 14, 1863. He was initially taken to Culpeper Court House for medical treatment. In an era with limited understanding of germs, infection soon set in. After a month's struggle to live, Posey died in Room 33 West Lawn at the University of Virginia, under the care of his good friend, Dr. John Davis, in Charlottesville, Virginia, in November. Posey was buried in the Davis family plot in the University of Virginia Cemetery.
The Carnot Posey Lodge #378 of the Masons was founded in 1875 and named in his memory.