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MacDonald was born Anne Elizabeth Campbell Bard in Boulder, Colorado. Her official birth date is given as March 26, 1908; however, public records indicate that she was actually born in 1907, on March 26. Her family moved from Butte, Montana, to the north slope of Seattle's Capitol Hill neighborhood in 1918, moving to the Laurelhurst neighborhood a year later and finally settling in the Roosevelt neighborhood in 1922, where she graduated from Roosevelt High School in 1924. MacDonald married Robert Eugene Heskett (1895-1951) in July 1927 when she was 20 years old and he was 31, and the couple moved to a chicken farm in the Olympic Peninsula's Chimacum Valley, near Center a few miles south of the seaside community of Port Townsend.

MacDonald left Robert in 1931 and returned to Seattle, where she worked at a variety of jobs to support her daughters Anne and Joan from her marriage to Heskett. Once the couple was divorced, contact between the two ex spouses was virtually nonexistent. Betty MacDonald spent nine months at Firlands Sanitorium outside of Seattle in 1937-1938 for treatment of tuberculosis.

On April 24, 1942, she married Donald C. MacDonald (1910-1975) and moved to Vashon Island, where she wrote most of her books. The MacDonalds later moved to California's Carmel Valley in 1956.

MacDonald rocketed to fame when her first book, The Egg and I, was published in 1945. It was a huge bestseller and was translated into 20 languages. Loosely based on her life on a Chimacum Valley chicken farm, it introduced the characters Ma and Pa Kettle, who also were featured in the movie version of The Egg and I and were so popular a series of nine more films were made featuring them.

MacDonald also published three other semi-autobiographical books: Anybody Can Do Anything recounting her life in the Depression trying to find work,The Plague and I about her stay at Firlands, and Onions in the Stew about her life on Vashon Island with her second husband and daughters during the War years. She also wrote the Mrs. Piggle Wiggle series of children's books that are still popular today, and another children's book entitled "Nancy and Plum.".

MacDonald died in Seattle, Washington, of cancer on February 7, 1958, aged 49.

MacDonald's sister, Mary Bard (Jensen), also was a published author. Her books include a series of children's stories called the "Best Friends" series, as well as "Forty Odd," "Just Be Yourself" and "The Doctor Wears Three Faces," which was made into the 1950 film "Mother Didn't Tell Me," starring Dorothy McGuire, William Lundigan, and June Havoc. MacDonald had two other sisters. Dorothea Bard and Alison Bard, and one brother, Sydney Cleveland Bard. Another sister, Sylvia, died in infancy. All her siblings are now dead.

In 2007, MacDonald's daughter, Anne MacDonald Canham, published Happy Birthday, Mrs. Piggle-Wiggle, based on stories and characters created by her mother. The book is attributed to both mother and daughter. MacDonald's younger daughter, Joan MacDonald Keil, died in July 2005.

On March 13, 2008, BBC Radio 4 broadcast a tribute programme to Betty MacDonald, commemorating the 100th anniversary of her birth. In 2009, BBC Radio 4 also broadcast a reading of MacDonald's book, "Anybody Can Do Anything."