Masterman was educated at Worcester College, Oxford where he read modern history. When war broke out in 1914 he was at the University of Friedberg in Germany and was arrested and interned for the duration as an ‘enemy alien’. During his incarceration Masterman improved his German.

Following his release in 1918 he returned to the UK, becoming a tutor on modern history at Christ Church, Oxford. He was also a noted sportsman and in the 1920s played Olympic hockey, tennis at Wimbledon and toured Canada with the Marylebone Cricket Club as well as playing several other sports at a high level.

When World War II broke out Masterman was drafted into the Intelligence Corps and was appointed as a Civil Assistant in MI5 where he was made the chairman of the Twenty Committee. This group ran the Double Cross System which turned captured German spies into double agents working for the British. Its name was a pun based on the Roman numeral XX and its double-cross purpose.

The Twenty Committee under Masterman were responsible for some of the greatest deceptions of the war, including Operation Fortitude, which helped protect the invasion of France in 1944. This saw the group use turned agents to reinforce the German’s own belief that the invasion would take place in the Pas de Calais area and not, as was the real plan, in Normandy.

Masterman was made an Officer of the Order of the British Empire (OBE) in June 1944 and, in November 1945, he was awarded the Order of the Yugoslav Crown by the exiled King Peter II. He was also awarded the War Medal and the Defence Medal.

After the war he returned to Oxford, becoming Provost of Worcester College (1946–61) and Vice-Chancellor of Oxford University during 1957 and 1958. Masterman was knighted for his services in 1959.