He was born in Newbury, Massachusetts. On October 16, 1745, he married Prudence Noyes. The following year, they and their first child, Ephraim, moved to Hampstead, New Hampshire. At the first town meeting on February 5, 1749, he was elected one of the town's five selectmen.
He was initially a lieutenant in the New Hampshire Provisional Regiment and spent the fall of 1755 scouting the area around Lake Champlain. Promoted to captain, he raised a company that was among the defenders at the siege of Fort William Henry in August 1757. When the British surrendered on the promise by the French victors that they would be protected from the latter's Native American allies. However, the terms of capitulation were violated; the Native Americans attacked the British soldiers and their dependents as they withdrew, killing many soldiers and capturing women, children, servants and slaves. Captain Bayley was among those who managed to escape. According to family tradition, he fled, running barefoot to Fort Edward; the Provincial Assembly of New Hampshire awarded him £14, 11s, 6p for his losses during the retreat, which included his shoes. The war turned in favor of the British. Bayley participated in General Amherst's capture of Fort Carillon and of Montreal in New France, which essentially ended the fighting in North America. By the end of the war, Bayley had been promoted, first to lieutenant-colonel, then to colonel.
With the war over, in the fall of 1760 Bayley and three hometown friends and fellow officers - Captain John Hazen and Lieutenants Jacob Kent and Timothy Bedell - left Montreal to go home. On their travels, they found a location at the Oxbow, an extension of the Connecticut River, that they decided to make their new home. In the summer of 1761, Bayley, Hazen and some hired hands cleared the fields around the Oxbow. The first four permanent settlers arrived in February 1762. On May 18, 1763, Benning Wentworth, colonial governor of the Province of New Hampshire, granted them charters for Newbury and Haverhill, on opposite sides of the Oxbow.
A dispute over land titles, which found Bayley and Ethan Allen on opposing sides, exacerbated by religious and other differences, resulted in mutual animosity.
On May 22, 1776, the Committees of the Counties of Cumberland and Gloucester, New York, nominated then-Colonel Bayley for the position of brigadier-general of the state militia of those counties. The promotion was approved. Bayley, as a colonel and later as a brigadier general, corresponded with George Washington, first regarding constructing the Bayley Hazen Military Road, then about the situation in Canada and a possible second invasion attempt. He and Moses Hazen built the Bayley Hazen Military Road, starting in 1776, to support a second invasion of Canada that never materialized. In 1777, he was appointed Commissary General of the Northern Department of the Continental Army. Bayley only saw action once in the war, leading a division in the October 7, 1777, portion of the Battles of Saratoga He was stationed with 2000 New Hampshire militiamen north of Fort Edward. In the early 1780s, the British were conducting the secretHaldimand Negotiations with the Vermont Republic. Because of Bayley's implacable opposition to negotiations with the British, an attempt was made to take him prisoner and take him to Canada, but it narrowly failed. Bayley's neighbor, Colonel Thomas Johnson, had earlier been captured by the British and released on parole, but he violated his parole in 1782 to forewarn Bayley.
