A sailor from the age of 10, Keppel served actively throughout the Seven Years' War (1756–63). In 1762 he served under Admiral Sir George Pocock in the British expedition that took Havana, and he received £25,000 in prize money as a result. He became a rear admiral in 1762 and vice admiral in 1770.

Keppel was a member of the House of Commons from 1761 to 1780 and a strong supporter of the Whigs. When he fought against France in 1778 as commander of the western squadron, he believed that the 4th Earl of Sandwich, who was then first lord of the Admiralty, would be glad to see his defeat. Sir Hugh Palliser, a member of the Admiralty Board, went to sea with Keppel in a subordinate command, and Keppel believed that the indecisive outcome of his battle against the French (July 27, 1778) off Ushant (a small island near Brittany) was partly due to Palliser's deliberate disregard of his orders. Palliser in return pressed for a court-martial of Keppel by the Admiralty on charges of misconduct and neglect of duty. Recriminations in the press then led to the trial and acquittal of Keppel for neglect of duty and of Palliser for insubordination.

Although Keppel was discharged from his command in 1779, he became first lord of the Admiralty and was created a viscount in 1782, after American victory in the war had precipitated the fall of Lord North's Tory ministry. Keppel resigned as first sea lord in 1783, however. He never married, and his titles became extinct upon his death.