The 1968–69 season was Colchester United's 27th season in their history and their first season back in the fourth tier of English football, the Fourth Division following relegation the previous season. Alongside competing in the Fourth Division, the club also participated in the FA Cup and the League Cup.

In a transitional season under new manager Dick Graham, Colchester missed an instant return to the third tier by four points, finishing the season in sixth place. The U's were eliminated at the second round of both FA and League Cups.

Colchester appointed former Crystal Palace manager Dick Graham to replace Neil Franklin. Having guided Palace from the Fourth Division to the Second Division, Graham intended to emulate his work at Selhurst Park.

Seven games into the season, with his side earning just one point, Graham cleared out the squad, ousting six players and sold Duncan Forbes and Derek Trevis for a combined fee of £19,000. He brought in a number of players, including goalkeeper Tony Macedo and former Tottenham Hotspur double-winner Terry Dyson. Colchester's form drastically improved, earning 33 points from a possible 42 to propel up the table into fourth position and the promotion places. However, after a poor Easter period, earning just two points against promotion-rivals Bradford City, Halifax Town and Swansea Town saw the U's slip back into sixth place and four points short of promotion.

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