Graduated from the U.S. Military Academy at West Point, N.Y. (1918), Clay served in army engineer assignments before becoming head of the first national civil airport program (1940–41). Soon after the U.S. entrance into the war (December 1941), he became a leading production and supply specialist and was placed in charge of the army procurement program (1942–44).

In 1945 Clay was assigned by Pres. Franklin D. Roosevelt to be deputy military governor in Germany under Gen. Dwight D. Eisenhower. Two years later he was elevated to commander in chief of the U.S. forces in Europe and military governor of the U.S. Zone in Germany. During these demanding years, he had to gauge the requirements of food and shelter for a devastated civilian population and, simultaneously, supervise a de-Nazification and de-industrialization program that would harmonize with the postwar recovery of Germany's neighbours. In 1948–49 his administration was marked by the successful Allied airlift of food and supplies into Berlin during the Soviet blockade of that city.

Following his retirement in May 1949 Clay entered private business and became active in politics as a supporter and adviser of President Eisenhower (1953–61). In 1961 and 1962 Pres. John F. Kennedy asked Clay to serve as his personal representative in Berlin, with the rank of ambassador, to help deal with the critical situation that had developed among the four occupying powers concerning that city's future status.