Born in Seattle, Washington, McCarthy was orphaned at the age of six when both her parents died in the great flu epidemic of 1918. She was raised in very unhappy circumstances by her Catholic father's parents in Minneapolis, Minnesota, under the direct care of an uncle and aunt she remembered for harsh treatment and abuse.
When the situation became intolerable, she was taken in by her maternal grandparents in Seattle, Augusta Morganstern, who was Jewish, and Harold Preston, a prominent attorney and co-founder of the law firm Preston Gates & Ellis, who was a Protestant. McCarthy credited her grandfather, who helped draft one of the nation's first Workmen's Compensation Acts, with helping form her liberal views. McCarthy explores the complex events of her early life in Minneapolis and her coming of age in Seattle in her memoir, Memories of a Catholic Girlhood. Her actor brother, Kevin McCarthy went on to star in such movies as Death of a Salesman (1951) and Invasion of the Body Snatchers (1956).
McCarthy left the Catholic church as a young woman when she became an atheist. In her contrarian fashion, McCarthy treasured her religious education for the classical foundation it provided her intellect while at the same time she depicted her loss of faith and her contests with religious authority as essential to her character.
In New York, she moved in "fellow-traveling" Communist circles early in the 1930s, but by the latter half of the decade she repudiated Soviet-style Communism, expressing solidarity with Leon Trotsky after the Moscow Trials, and vigorously countering playwrights and authors she considered to be sympathetic to Stalinism.
As part of the Partisan Review circle and as a contributor to The Nation, The New Republic, Harper's Magazine, and The New York Review of Books, she garnered attention as a cutting critic, advocating the necessity for creative autonomy that transcends doctrine. During the 1940s and 1950s she became a liberal critic of both McCarthyism and Communism. She maintained her commitment to liberal critiques of culture and power to the end of her life, opposing the Vietnam War in the 1960s and covering the Watergate scandal hearings in the 1970s.
She married four times. In 1933 she married Harald Johnsrud, an actor and would-be playwright. Her best-known spouse was the writer and critic Edmund Wilson, whom she married in 1938 after leaving her lover Philip Rahv, and by whom she had a son, Reuel Wilson.
Although she broke ranks with some of her Partisan Review colleagues when they swerved toward conservative politics after World War II, she carried on life-long friendships with Dwight Macdonald, Nicola Chiaromonte, Philip Rahv and Elizabeth Hardwick. Perhaps most prized of all was her close friendship with Hannah Arendt, with whom she maintained a sizable correspondence widely regarded for its intellectual rigor.
Her debut novel, The Company She Keeps received critical acclaim as a succès de scandale, depicting the social milieu of New York intellectuals of the late 1930s with unreserved frankness. After building a reputation as a satirist and critic, McCarthy enjoyed popular success when her 1963 novel The Group remained on the New York Times Best Seller list for almost two years. Her work is noted for its precise prose and its complex mixture of autobiography and fiction.
Her feud with fellow writer Lillian Hellman formed the basis for the play Imaginary Friends by Nora Ephron. The feud had simmered since the late 1930s over ideological differences, particularly the questions of the Moscow Trials and of Hellman's support for the "Popular Front" with Stalin. McCarthy provoked Hellman in 1979 when she famously said on The Dick Cavett Show: "every word [Hellman] writes is a lie, including 'and' and 'the'." Hellman responded by filing a $2.5 million libel suit against McCarthy. (The suit ended shortly after Hellman died in 1984.) Observers of the trial noted that the resulting irony of Hellman's defamation suit is that it brought significant disrepute upon herself (Hellman) by forcing McCarthy and her supporters to prove that she was a liar in court.