A Chao’s life lasts for 5 years and then it reaches the end of its life. The age of your Chao is shown in the Medical Chart with the Chao Doctor (in the Kindergarten).
A Chao Year lasts around three real life hours. If you care for your Chao extra well, it’s years will take longer. Likewise if your Chao is unhappy and get hit alot, it will take shorter to age and in turn, die quicker. Also note, that some studies show that when a Chao breeds with another Chao, its lifespan decreases (unconfirmed).
If your Chao had a high enough happiness stat (greater than 30), it will reincarnate and leave an egg. If it didn’t, then sadly your Chao will not reincarnate and will be gone forever. When your Chao starts going into a cocoon about to die, the cocoon will be pink coloured if it is going to reincarnate and grey coloured if it is about to disappear forever.
If your Chao reincarnates, it will keep its name, race badges, personality and its grades. However its stats go down to level one, and only keeps 10% of what they were before. You may want to look at the wiki page for more details on this.
Dreamcast Chao Doctor
If your Chao is 5 hours old or less, The Chao Doctor will say “this Chao is growing”. More than 6 hours will result in him saying “this Chao has had a long life”.