Caroline Jones was born in Northamptonshire, England, into a family with a strong tradition of charitable works.
In 1830 she married Captain Archibald Chisholm, an officer with the East India Company, and accompanied him to Madras in India, where she founded a school for daughters of European soldiers. In 1838 her husband was granted sick leave, which they spent in New South Wales, where she remained when he went back to active service.

Chisholm worked to help settle the thousands of unemployed immigrants concentrated in Sydney, especially women. She met incoming ships, offering the women and girls shelter in her newly opened Female Immigrants' Home; she then arranged transport to inland areas, often escorting the women herself to help them find work. She also ran schemes to place men and their families on the land. During her six years in Sydney, some 11,000 immigrants passed through her hands. Her report on this work, Female Immigration, Considered in a Brief Account of the Sydney Immigrants' Home (1842), was the first publication by an Australian woman.

On her husband's retirement, in 1845, Chisholm returned to England where she promoted her family reunion scheme, raising money and support, and also opened an emigration office in London. In 1854 she went back to Australia, where her welfare initiatives included providing shelters for workers going out to the goldfields. She also lectured on land reform and later opened a girls' school in Sydney to raise money for her philanthropic work. In 1857 she developed health problems and in 1866 she and her family returned to England. She died in London in 1877.