Karl was the elder son of Hartmann II, Baron of Liechtenstein (1544–1585) and his wife, Countess Anna Maria of Ortenburg (1547–1601).

Emperor Rudolf II of the Holy Roman Empire appointed Karl as chief intendant (Obersthofmeister), an important position at his court.

Liechtenstein played a leading role as adviser and supporter of Matthias in the coup against Emperor Rudolf II.

In thanks for further aid at the Battle of White Mountain, Karl was appointed to the positions of proconsul and vice-regent of Bohemia in 1622, and he was bestowed with the Order of the Golden Fleece.

In 1605, Karl established the first branch north of the Alps of the Hospitaller Order of Saint John of God, at Feldsberg in Lower Austria (now Valtice, Czech Republic).