He was the son of Leopold Philip Charles, Fürst (Prince) of Salm, and his wife, Maria Anna of Bronckhorst-Batenburg, a Dutch noblewoman from Gelderland.
In 1682 he joined the Imperial Army and fought against the Turks in the Battle of Vienna and the Siege of Buda (1684).
When Joseph I became Emperor in 1705, Carl Theodor Otto remained Obersthofmeister and First Geheime Rat, which gave him powers equal to that of a Prime Minister.
But he was more and more opposed by the successful and influential Field Marshal Prince Eugene of Savoy.
After Carl Theodor Otto caused a painful conflict with Pope Clement XI in 1709 over the city of Comacchio, he was encouraged to retire from service due to health problems.