Douglas was born in 1741, the son of Reverend Alexander Douglas of Baads in Midlothian, and his wife, Isabel Houston. He was commissioned as a lieutenant on 17 June 1760.
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Douglas was promoted to commander of the HMS Chameleon (1777) on 19 September 1777 and sailed to Jamaica in December of that year. He was posted captain on 5 April 1779. In December 1779, he was appointed to command the HMS Terrible, which he commanded at the Moonlight Battle off Cape St. Vincent on 16 January 1780. He also took part in the Battle of Martinique on 17 April 1780, where his ship did not suffer any casualties, but he was one of five captains praised by Admiral Sir George Rodney for his part in the action.
After the Battle of Martinique, Douglas transferred to the HMS Venus, participating in the remainder of the Leeward Islands campaign from May to July 1780. He briefly flew the flag of Admiral Rodney and returned home with despatches after the capture of St. Eustatius on 3 February 1781. Douglas then experienced a period of unemployment, but recommissioned the HMS Vigilant in January 1782 to serve in the Channel Fleet.
For a short period from October to December 1794, he commanded the HMS Irresistible. He was advanced to flag rank on 1 June 1795, and promoted to vice-admiral on 1 January 1801. Despite his many years of unemployment, he briefly served as second-in-command of the Channel Fleet under Admiral Hon. William Cornwallis in 1805–6.
Douglas married his cousin Charlotte Douglas, the only daughter of John St. Leger Douglas of Chelmsford, Essex, who served as an M.P from 1768 to 1783. The marriage produced no issue. Douglas became an admiral on 28 April 1808, and died in Montague Square, London, on 13 November 1810.