In his 1989 memoir Loyalties, Bernstein revealed that his parents had been members of the Communist Party, which shocked some because even J. Edgar Hoover had tried and been unable to prove that Bernstein's parents were party members. Bernstein's parents were allegedly persecuted during the 1950s. The FBI conducted surveillance on his family over a 30 year period producing over 2,500 pages of documents, including notes taken by agents staking out his bar mitzvah.

Bernstein graduated from Montgomery Blair High School in Silver Spring, Maryland. He subsequently attended the University of Maryland, College Park, but did not graduate. Bernstein, who is Jewish, is a lifetime member of B'nai B'rith and once was President of B'nai B'rith's Northern Region.

Bernstein met Margaret Jay, daughter of British Prime Minister James Callaghan and wife of Peter Jay, then UK ambassador to the United States. They had a much-publicised extramarital relationship in 1979. Margaret later became a government minister in her own right. Bernstein and his second wife, screenwriter Nora Ephron, already had an infant son, Jacob, and she was pregnant with their second son, Max, in 1980 when she learned of her husband's affair with Jay. Ephron delivered Max prematurely after finding out. Writer Ephron was inspired by the events to write the 1983 novel Heartburn, which was made into a 1986 film starring Jack Nicholson and Meryl Streep. In the thinly fictionalized book, Ephron gave unflattering depictions of both Jay and Bernstein, writing of a husband who was “capable of having sex with a Venetian blind" and saying that Jay looked like a giraffe with "big feet."

Bernstein then became known for dating Bianca Jagger, Martha Stewart and Elizabeth Taylor.

He currently resides in New York with his wife, Christine.

Bernstein began working for The Washington Post in 1966 and played an integral role in his partnership with Bob Woodward during the Watergate scandal. Bernstein was the first to suspect that Nixon played a part, and Bernstein found the laundered check that linked Nixon to the burglary.

Bernstein quit The Washington Post in 1976. Post-Watergate, he did not realize the same level of success that Woodward did; his frequent appearances in gossip columns resulting from the book Ephron wrote, his arrest, and his dating of Hollywood celebrities overshadowed his journalistic accomplishments. Notably, Washington Post owner Katharine Graham did not invite him to the newspaper's 70th birthday gala, which was widely regarded as a snub given Bernstein's contributions toward bringing the Post to international stature.

After leaving the Post, he worked as the Washington Bureau Chief and as a senior correspondent for ABC News, taught at New York University, and contributed to Time. Bernstein authored two books with Woodward: All the President's Men, which details the successes and failures of their journalistic efforts against the backdrop of the unfolding scandal, and The Final Days, a recounting of the concluding months of the Nixon presidency, although Woodward questioned Bernstein's contributions to the latter book and reportedly did not want to list Bernstein as a co-author. Woodward said, "It was not the most productive time for Carl." Woodward reportedly turned down offers to again work with Bernstein on an investigative column or any further books.

He co-authored the book His Holiness: John Paul II & the History of Our Time with Marco Politi. Following the May 2005 revelation of the identity of Deep Throat, Bernstein contributed to Woodward's book The Secret Man, which pertains to Woodward's relationship with Mark Felt.

Bernstein wrote a memoir, a "pained, loving, intensely felt account of his parents' ordeal, and his own emotional upheaval, during President Harry Truman's loyalty purges." He has also written a biography of Hillary Rodham Clinton, A Woman In Charge: The Life of Hillary Rodham Clinton, published by Alfred A. Knopf on June 5, 2007.

He is a contributing editor to Vanity Fair magazine.