She was born and raised in Montreal, Quebec by an American father and a Canadian mother Margery Rhea. She has two sisters. Cynthia Rhea and Celia Rhea. Caroline is fluent in French and English. She moved to New York in 1989 to study stand-up comedy at the New School for Social Research. She says her true training came from her first gigs at the comedy club Catch A Rising Star. Performing around New York City, she quickly gained a reputation, and a name in the city's competitive comedy scene. These performances were augmented with appearances on MTV's Half-Hour Comedy Hour, Comic Strip Live and Caroline's Comedy Hour.
She is one of many famous comedians coming from Montreal.