Steel was the son of barrister David Steel and Mary Winde, daughter of Scudamore Winde, judge of the Supreme Court of Jamaica. Steel joined the East India Company's service as a cadet in 1805, and the following year was promoted to lieutenant in the Madras Army. He was slightly wounded in the Third Anglo-Maratha War of 1817–18. He was promoted to captain in 1821, and joined the 51st native infantry in 1824. He served on the quartermaster-general's staff at Nagpur and in the First Anglo-Burmese War in 1826. Steel was promoted to major in 1832, and from 1832 to 1845 served as secretary in the military department at Madras.