Chace was born on August 24, 1769 in Swansea, Massachusetts to Jonathan Chace and Mary Earle, members of well known Yankee families in New England who had come from England in 1630 in the Puritan fleet with Governor John Winthrop. Chace and his family were Quakers (Society of Friends).
Oliver Chace married Susanna Buffington on September 15, 1796. They had seven children together. Oliver's two eldest sons, Harvey (born 1797) and Samuel Buffington (born 1800) would later follow their father into the textile business. Susanna Chace died on July 30, 1827. Oliver's second marriage was to Patience Robinson. They had no children.
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