Carstairs was born in 1900 in Mayfair, London, England, the daughter of Frances (Fannie) Evelyn Bostwick, an American heiress who was the second child of Jabez Bostwick and his wife Helen. Joe Carstairs' legal father was Scottish army officer Captain Albert Carstairs, first of the Royal Irish Rifles and later the Princess of Wales's Own. Captain Carstairs re-enlisted with the Army the week before Joe was born; he and Evelyn divorced soon afterwards. At least one biographer has suggested that the Captain may not have been Joe's biological father.
Carstairs' mother, an alcoholic and drug addict, later married Captain Francis Francis, with whom she had two more children, Evelyn (Sally) Francis and Francis Francis Jr. (Frank). She divorced Captain Francis to marry French count Roger de Périgny in 1915, but eventually left him because of his infidelity. Her fourth and last husband, whom she married in 1920, was Serge Voronoff, a Russian–French surgeon who become famous in the 1920s and 1930s for his practice of transplanting monkey testicle tissue into male humans for the claimed purpose of rejuvenation. For some years Evelyn had believed in Voronoff's theories, and she funded his research and acted as his laboratory assistant at the Collège de France in Paris. Evelyn died in March 1921.
Joe Carstairs married a childhood friend, the French aristocrat Count Jacques de Pret, on 7 January 1918 in Paris. The purpose of the marriage was simply to allow Carstairs access to her trust fund independently of her mother. The marriage was annulled immediately after her mother's death, on the grounds of non-consummation. By means of a Deed poll, she renounced her married name and resumed using the name Carstairs in February 1922.
Carstairs lived a colourful life. She usually dressed as a man, had tattooed arms, and loved machines, adventure and speed. Openly lesbian, she had numerous affairs with women, including Dolly Wilde—Oscar Wilde's niece and a fellow ambulance driver from Dublin with whom she had lived in Paris—and a string of actresses, most notably Greta Garbo, Tallulah Bankhead, and Marlene Dietrich.
During World War I, Carstairs served in France with the American Red Cross, driving ambulances. After the war, she served with the Royal Army Service Corps in France, re-burying the war-dead, and in Dublin with the Women's Legion Mechanical Transport Section, which acted as transport for British officers during the Irish War of Independence. In 1920, with three former colleagues from the Women's Legion Mechanical Transport Section, she started the 'X Garage,' a car-hire and chauffeuring service that featured a women-only staff of drivers and mechanics. Carstairs (and her friends and lovers) lived in a flat above the garage, which was situated near Cromwell Gardens in London's fashionable South Kensington district.
Several of the X-Garage staff had served as drivers during the war and spoke French, German, or Italian. The cars and drivers could be hired for long-distance trips and the business specialised in taking grieving relatives for visits to war-graves and former battlefields in France and Belgium. They were also hired for journeys within London and the garage had an arrangement with the Savoy Hotel to transport guests to the theatre or to shows. During the early 1920s, X-Garage cars were a familiar sight in London's fashionable circles.
In 1925, X-Garage closed and Carstairs inherited a fortune via her mother and grandmother from Standard Oil. She also purchased her first motorboat and was also given a Steiff doll by a girlfriend, Ruth Baldwin (1905 – August, 1937), naming it Lord Tod Wadley. She became exceptionally attached to this doll, keeping it with her until her death, although—unlike Donald Campbell's mascot 'Mr Whoppit'—she didn't take it into her speedboats for fear of losing it. She had clothes made for it in Saville Row and had its name placed with her own on the name plaque on the door of her London apartment.
Between 1925 and 1930, Carstairs spent considerable time in powerboats and became a very successful racer, although the Harmsworth Trophy she longed for always eluded her. She did take the Duke of York's trophy and establish herself as the fastest woman on water. Intrigued by the hydrofoil designs of Alexander Graham Bell and Casey Baldwin in Nova Scotia, Carstairs ordered a 30-foot hydrofoil boat from the Bell Boatyard in Baddeck, Nova Scotia which was intended to achieve 115 mph and capture the Harmsworth Cup. However circumstances caused her to withdraw and the boat was completed with a more economical engine delivering 57 mph. During this time, the North American press erroneously began referring to her as "Betty," a nickname she loathed; she claimed that journalists used it out of spite.
Carstairs was also known for her generosity to her friends. She was close to several male racing drivers and land speed record competitors, using her considerable wealth to assist them. She paid $10,000 of her money to fund the building of one of the Blue Bird land speed record cars for Sir Malcolm Campbell, who once described her as, "the greatest sportsman I know." She was equally generous to John Cobb, whose Railton Special was powered by the pair of engines from her powerboat Estelle V.
Meanwhile, Carstairs invested $40,000 purchasing the island of Whale Cay in the Bahamas where she lavishly hosted such guests as Marlene Dietrich and the Duke and Duchess of Windsor. She not only constructed a Great House for herself and her guests, but also a lighthouse, school, church, and cannery. She later expanded these properties by also buying the additional islands of Bird Cay, Cat Cay, Devil's Cay, half of Hoffman's Cay and a tract of land on Andros.
After selling Whale Cay in 1975, Carstairs relocated to Miami, Florida.
Carstairs died in Naples, Florida, in 1993 at the age of 93. Lord Tod Wadley was cremated with her. Their ashes and those of Ruth Baldwin were buried by the sea near the Old Whaler's Church (Sag Harbor), New York.