His maternal grandparents had emigrated to Australia from Pembrokeshire. His paternal grandparents were from Gloucestershire and Devon in England. His parents were married in Australia. His father, Sir Charles Langbridge Morgan was a railway civil engineer, and at one time was President of The Institution of Civil Engineers. Morgan himself was born in Bromley, Kent. He was educated at the Naval Colleges of Osborne and Dartmouth and served as a midshipman in the China Fleet until 1913, when he returned to England to take the entrance examinations for Oxford. On the outbreak of war he rejoined the navy but was sent with Churchill's Naval Division to the defence of Antwerp. He was interned in Holland which provided the setting for his best-selling novel The Fountain.
Some of his early poems were published in the Westminster Gazette. "To America" (1917) was included in A Treasury of World Poetry, edited by George Herbert Clarke. After World War I, he took his degree at Brasenose College, Oxford. After an unsuccessful relationship with Mary, a daughter of Alfred Mond, 1st Baron Melchett, he married the Welsh novelist Hilda Vaughan in 1923. They had two children: Dame Shirley Paget, Marchioness of Anglesey, and Roger Morgan, who became Librarian of the House of Lords. He was the drama critic of The Times from the 1920s until 1938, and contributed weekly articles on the London theatre to the New York Times. He wrote a series of articles for the Times Literary Supplement under the byline "Menander's Mirror" from 1942, and many articles for the Sunday Times.
His first play, The Flashing Stream (1938), had successful runs in London and Paris but was not well received in New York. The River Line (1952) was originally written as a novel in 1949 and concerned the activities of escaped British prisoners of war in France during World War II.
While Morgan enjoyed an immense reputation during his lifetime and was awarded the 1940 James Tait Black Memorial Prize for fiction, he was often criticised for excessive seriousness, and is now rather neglected; he once claimed that the "sense of humour by which we are ruled avoids emotion and vision and grandeur of spirit as a weevil avoids the sun. It has banished tragedy from our theatre, eloquence from our debates, glory from our years of peace, splendour from our wars..." The character Gerard Challis in Stella Gibbons's Westwood is thought to be a caricature of him.
The main themes of his work were romantic love, mysticism, and a longing for the timeless and sublime through telling the stories of idealistic and artistic protagonists.
"There is no surprise more magical than the surprise of being loved. It is God's finger on man's shoulder."