Percy Lay was 22 years old when he signed his attestation papers at Ballarat to enlist in the Australian Imperial Force just weeks after the outbreak of war in August 1914. He served with the 8th Battalion on Gallipoli and the Western Front, and by the beginning of 1918 he had been promoted four times and awarded the Military Medal, the Military Cross, the Distinguished Conduct Medal, and the French Croix de Guerre. One of his superior officers described him as "always a volunteer for any work which entails danger and his coolness and courage under fire are noticeable".

In January 1918 Lay was offered a posting with Dunsterforce in the Middle East. In his diary he expressed his sadness at leaving his battalion, but subsequent entries soon focused on his activities in Persia, including learning Persian, Russian, and sword-fighting. On one occasion, he had to determine whether a local headman, Sheik Ali, was hiding among a group of 40 women at Hamadan. Lay arrived back in Australia during May 1919 and continued military work at the Domain camp in Melbourne. He left again in September with the Special Service Unit to escort deportees overseas.

For the next twenty years, Lay lived and worked on his farm 'Lucerne Farm' near Alphington, Victoria. He enlisted in the Army again on 24 June 1940. Rising to the rank of major, he was posted to several training and garrison units before being transferred to the 1st Australian Works Company.

Following his return to civilian life again in 1945, Lay returned to Alphington. Percy Lay died at Heidleberg, Victoria on 28 August 1955.