She was born in relative poverty the East End of London, one of 16 children of a fruit and vegetable seller, and first appeared on the stage in 1912; she made her film debut in 1923 in the silent film "The Beloved Vagabond."

In 1925, she married actor Henry Lytton, Jr., the first of her three husbands (the others were actor-director Sonny Hale and military officer, Lt. Brian Lewis). All of her marriages ended in divorce and all were marred by miscarriages and stillbirths; she and Hale had one adopted daughter, Catherine Hale. She had many failed relationships, including a romance with Prince George, Duke of Kent, and some of her much publicized temperamental behavior and emotional tempestuousness can be traced to the secret but lifelong psychological trauma that resulted from having being raped and impregnated at the age of 16 by a friend of the then Prince of Wales.

Her first major success was in the stage production of Evergreen, a musical by Rodgers and Hart, filmed in 1934, during which she sang Daddy Wouldn't Buy Me a Bow Wow. And she was famed as the originator of numerous popular songs, including "Room With a View" by Noël Coward and "Let's Do It" by Cole Porter. After a string of hit films, Matthews developed a following in the USA, where she was dubbed "The Dancing Divinity". Her warbling voice and round cheeks made her a familiar and much-loved personality to British film audiences at the beginning of World War II, but her popularity waned.

After a few false starts as a straight actress, she played Tom Thumb's mother in the 1958 children's film, and during the 1960s found new fame when she was given the leading role in the BBC's long-running radio serial, Mrs Dale's Diary (aka The Dales). She was awarded a well-deserved OBE in 1970 and continued to make cabaret appearances.

She had suffered from ill-health throughout her life and eventually died of cancer at the age of 74 in Britain