Chipley was born in Columbus, Georgia, the son of Doctor William Stout Chipley and Elizabeth Fannin Chipley. Chipley's grandfather, the Reverend Stephen Chipley, was one of the founding citizens of Lexington, Kentucky. William Stout Chipley was renowned for his work relating to brain diseases and held two jobs: a professor of medicine at Transylvania University and the warden of the Eastern Asylum for the Insane in Lexington.
Chipley moved with his parents back to Lexington when he was four years old, and was raised for all of his formative years in Kentucky. He graduated from the Kentucky Military Institute and Transylvania University.
After graduation from Transylvania, he enlisted in the 9th Kentucky Infantry, fighting for the Confederacy. He was elevated to the position of lieutenant colonel and was wounded at the battles of Shiloh and Chickamauga before being taken prisoner at the Battle of Peachtree Creek near Atlanta. As a prisoner of war, Chipley was transported to Johnson's Island on Lake Erie in Ohio, and served time there until the war was over. In mid-1865, he settled in Columbus, Georgia and married Ann Elizabeth Billups, the daughter of a prominent Phenix City, Alabama planter.
Chipley would later be implicated in the Ashburn affair. He was brought to trial, in which the federal government attempted to jail Chipley for his role in the murders of the soldiers he fought during the Civil War. With Alexander Stephens representing the defense, Chipley was found not guilty by a jury of his peers. It was only revealed later that Mrs. Chipley had in her possession a letter Stephens wrote to Chipley, in which the government apologized to Chipley and offered him freedom because the prosecution had no evidence. Chipley turned down the offer, and instead waited for vindication at the trial.
Chipley became fascinated with the railroad industry shortly after the Ashburn affair trial. He built what would become the Columbus and Rome Railroad, and later became involved with the Baltimore and Ohio Railroad from 1873 to 1876. It was at this time that he moved to Pensacola, Florida, where he built the town's first railroad (this line would eventually become a part of the Louisville and Nashville Railroad). He also built the Pensacola and Atlantic Railroad, linking the Atlantic coast of Florida with the Gulf Coast states for the first time.
His achievements in the railroad industry inspired the residents of Orange to name their town Chipley in 1882.
After opening the two rail lines in Pensacola, he parlayed his industrial success into one term as the mayor of the town (1887–1888). He also served in the Florida State Senate from 1895 to 1897, and lost his bid for United States Senator in 1896 by one vote.
While on a trip to Washington D.C., Chipley died on December 1, 1897. He was in the middle of a trip to lobby lawmakers to base more industrial endeavors in Florida. He was buried in Columbus, while the townspeople of Pensacola erected an obelisk in the Plaza Ferdinand VII in his honor.