Born in Los Angeles, California, he began in the movie business as an assistant director to Tod Browning in 1920, but honed his skills at the Hal Roach Studio for the rest of that decade. Hired by Roach in 1923, McCarey initially wrote gags for Our Gang series and other studio stars, then produced and directed shorts-including a string of inventive and hilarious two-reelers with Charley Chase. It was while at Roach that McCarey teamed Stan Laurel & Oliver Hardy together for the first time, thus creating one of the most enduring comedy teams of all time. He only officially appeared as director of the duo shorts We Faw Down (1928), Liberty (1929) and Wrong Again (1929), but wrote many of the screenplays. By 1929, he was vice-president of production for the entire studio.

In the sound era McCarey ventured into feature-film directing, working with many of the greatest comedic talents of the time, including Eddie Cantor (1932's The Kid From Spain), the Marx Brothers (1933's Duck Soup, W.C. Fields (1934's Six of a Kind), Mae West (1934) Belle of the Nineties) and Harold Lloyd (1936's The Milky Way). He won his first Best Director Oscar for The Awful Truth (1937, with Cary Grant and Irene Dunne), the quintessential screwball comedy that launched Cary Grant's unique screen persona, largely concocted by McCarey (Grant also copied many of McCarey's mannerisms, and actor Cary and director McCarey even shared an eerie physical resemblance). As writer/director Peter Bogdanovich notes, "After The Awful Truth, when it came to light comedy, there was Cary Grant and then everyone else was an also-ran."

Beyond his predilection for comedy, McCarey was a devout Roman Catholic and deeply concerned with social issues. During the 1940s, his work became more serious - McCarey was concerned with the battles that had yet to be fought for human dignity, after World War II was won. In 1944 he realized Going My Way, a story about an enterprising priest, the youthful Father Chuck O'Malley, played by Bing Crosby. McCarey's share in the profits of this smash hit gave McCarey the highest reported income in the U.S. for the year 1944, and its follow-up, The Bells of St. Mary's (1945), which was made by McCarey's own production company, was similarly successful.

The public reacted negatively to some of his films after the Korean War. For instance, his anti-communist film My Son, John (1952), failed at the box office. Five years later, however, he was back on top, as co-author, producer, and director of An Affair to Remember, a classic romantic comedy with Cary Grant and Deborah Kerr, a deft remake of his 1939 classic Love Affair with Irene Dunne and Charles Boyer (although critics largely agree that the first version was superior, the Cary Grant film overshadowed it and Love Affair remains largely forgotten today). He followed this hit with Rally 'Round the Flag, Boys! (1958), a comedy starring Paul Newman and Joanne Woodward. Some years later he directed his last picture, the poorly-received Satan Never Sleeps (1962).

Leo McCarey died seven years later of emphysema and was interred in the Holy Cross Cemetery in Culver City, California.