From rural Fountain Inn, South Carolina he was raised by his mother, Emma, after his father abandoned them. He loved to dance. He started dancing at the age of five. When he was 12, he lost his left leg after it was mangled in the conveyor belt of a cotton separator at a mill where he was working. With no hospital nearby for Black people, his leg was amputated on the table in his mother's kitchen. After the mill accident, people said he would never dance again.

Clayton "Peg Leg" Bates started to dance again using two broomsticks under his arm until his uncle, Whitt Stewart, made his peg leg. Within a short time, his peg leg matched the dancing ability of his other leg. Bates and his mother moved to Greenville where he danced at carnivals and county fairs until a New York producer discovered him at Greenville Black Liberty Theatre in 1927. By this time, he could leap five feet in the air and perform almost every known tap dance step. He performed at the Lafayette Theatre in New York with Bill "Bojangles" Robinson.

For many years of his professional life, he had been denied the opportunity to sleep in hotels at resorts where he performed. He never considered himself handicapped. "God showed me what to do with one leg. God blesses us differently." In a brief time Bates was a showstopper, dancing at the Apollo Theatre, the Cotton Club and resorts and clubs throughout the United States. He gave two command performances before the King and Queen of England. He appeared on many television shows, including 21 times on the Ed Sullivan Show and toured Europe, South America and Australia.