Born to Scottish immigrants in Dutchess County, New York, McArthur grew up in western Pennsylvania and later moved to Kentucky, where he was employed as an Indian ranger. McArthur moved across the Ohio River in 1797 to the new town of Chillicothe, Ohio, which was to become the state capital in 1803. McArthur grew wealthy investing in land in the surrounding area.

He was elected to the United States House of Representatives from Ohio's 3rd congressional district while serving in the militia during the War of 1812, but never qualified for office, preferring to continue serving in the military. He was appointed colonel of Ohio volunteers and was second-in-command to General William Hull at Fort Detroit. He and Colonel Lewis Cass were not present at Detroit when Hull surrendered and were greatly angered to hear that Hull had included both of them in the capitulation. When a British officer notified him of the surrender, McArthur tore off his epalettes and broke his sword in a fit of rage. He was paroled and returned to Ohio. He was appointed a Brigadier General in the U.S. Army and commanded a brigade under William H. Harrison during the battle of the Thames. Shortly thereafter and was placed in charge of the Army of the Northwest after Harrison's resignation. He did not face much action but was instead engaged in negotiating treaties with the Indians.

McArthur served intermittently thereafter in the Ohio House of Representatives and Ohio State Senate, as well as a single term from 1823-1825 in the United States House of Representatives before winning election to the governorship in 1830. McArthur served a single term and did not seek re-election.