Eldest son of Frederick II of Saxe-Gotha-Altenburg (1676-1732) and Magdalena Augusta of Anhalt-Zerbst (1679-1740). His youngest sister, Augusta (1719-1772), in 1736 married Frederick, Prince of Wales (1707-1751) and in 1738 she became the mother of George William Frederick (1738-1820), the later King George III of Great Britain.
Frederick III in 1729 married Luise Dorothea of Saxe-Meiningen, with whom he had nine children, four of which lived to adulthood. In 1732 he succeeded his father as regent of the duchy of Saxe-Gotha-Altenburg.
From 1748 to 1755 he was regent of the duchy of Saxe-Weimar-Eisenach on behalf of Ernst August II Konstantin. From 1750, he acted as regent alongside with his kinsman Franz Josias, Duke of Saxe-Coburg-Saalfeld.
He was succeeded as the Duke of Saxe-Gotha-Altenburg by his son, Ernst II (1745-1804).
Boswell was presented to the duke and duchess of Saxe-Gotha-Altenburg, presumably by Siegmund Carl von Thüngen, on October 17, 1764. He dined at the court and described the Duke and Duchess as "plain Old People", the duke talking of "Ma Sæur (the Princess of Wales) just like a good Scots nobleman." Boswell found the court "easy and cordial" and he noted in his journal that they even "made a Whist-Party for me".