She was born Marjory Ford in New York, New York, the daughter of Albert James Ford and Virginia Martha Wright. Her sister was Jean Valentine Ford (born 1914).

Booth began her career on the stage as a teenager, acting in stock company productions, and was briefly known as Thelma Booth Ford. Her Broadway debut was in the play Hell's Bells opposite Humphrey Bogart on January 26, 1925. During the 1930s and 1940s, she achieved popularity in dramas, comedies and musicals. She acted with Katharine Hepburn in The Philadelphia Story (1939) and with Ralph Bellamy in Tomorrow the World (1943).

Booth also starred on the popular radio series Duffy's Tavern, portraying the lighthearted "Miss Duffy" on CBS radio from 1941 to 1942 and on NBC-Blue Radio from 1942 to 1943, and won an audience of fans over the airwaves.

She had two husbands, actor Ed Gardner (married 1929-divorced 1942) and William Baker (married 1943-his death 1951), but had no children.

She received her first Tony Award, for Best Supporting or Featured Actress (Dramatic), for her performance as Grace Woods in Goodbye, My Fancy (1948). Her second Tony was for Best Actress in a Play, which she received for her widely acclaimed performance of the tortured wife, Lola Delaney, in the poignant drama Come Back, Little Sheba (1950). Her leading man, Sidney Blackmer, received the Tony for Best Actor in a Play for his performance as her husband, Doc.

Booth's enormous success in Come Back, Little Sheba was immediately followed by A Tree Grows in Brooklyn (1951), in which she played the feisty but lovable Aunt Cissy. She then went to Hollywood and recreated her stage role in the motion picture version of Come Back, Little Sheba (1952), with Burt Lancaster playing Doc. After that movie, her first, was completed, she returned to New York and played Leona Samish in The Time of the Cockoo (1952) on Broadway.

In 1953, she received the Academy Award for Best Actress in a Leading Role for her performance as Lola Delaney in the successful movie, Come Back, Little Sheba, becoming the first actress ever to win both a Tony and an Oscar for the same role. She also received her third Tony, which was her second in the Best Actress in a Play category, for her performance in The Time of the Cuckoo.

Booth's major stardom was a long time coming, she was 54 when she made her first movie although she had successfully deleted a decade off her age, with her publicity stating 1907 as the year of her birth, which was widely believed as such until her death notice confirmed that she was born nearly a decade earlier. Widely admired within the industry, she was acclaimed by everyone as one of the best actresses of the 1950s in movies and theatre.

She spent the next few years commuting between New York and Southern California. On Broadway, she scored personal successes in the musical By the Beautiful Sea (1954) and the comedy The Desk Set (1955). Although Booth had become well known to moviegoers during this period, the movie versions of both Cuckoo, which was re-titled for the movie Summertime, and Desk Set went to Katharine Hepburn.

After Come Back, Little Sheba, Booth made only four other movies, as herself in the all-star novelty Main Street to Broadway (1953), playing Mrs. Vivien Leslie in the romance/drama About Mrs. Leslie (1954), playing Dolly Gallagher Levi in Thornton Wilder's romance/comedy The Matchmaker (1958), which is the movie version of the nonmusical play that Hello, Dolly! was later based on, and playing Alma Duval in the drama Hot Spell (1958).

In 1957, she won the Sarah Siddons Award for her work on the stage in Chicago. She returned to the Broadway stage in 1959, starring as the long-suffering title character in the Marc Blitzstein musical Juno, an adaptation of Sean O'Casey's 1924 classic play, Juno and the Paycock.

In 1961, she began starring in the long-running TV sitcom Hazel, based on a popular comic strip about a sassy, wisecracking and domineering, yet lovable housemaid, Hazel Burke. For this role she won two Emmys, in 1962 and 1963, and new stardom with a younger audience. She told the Associated Press in 1963, "I liked playing Hazel the first time I read one of the scripts, and I could see all the possibilities of the character-the comedy would take care of itself. My job was to give her heart. Hazel never bores me. Besides, she's my insurance policy."

Booth was a distinguished and versatile performer, equally at home acting in theatre, radio, and on the big and small screen. She had a long and prestigious list of stage credits and made numerous appearances in TV movies and programs. She also did voice work for the animated special The Year Without a Santa Claus, playing Mrs. Santa. Her last Broadway appearance was in a revival of Noel Coward's play, Hay Fever (1970).