When MacLeod was ten his family moved to a farm in Dunvegan, Inverness County on Nova Scotia's Cape Breton Island. After completing high school, MacLeod attended teacher's college in Truro and then taught school. He studied at St. Francis Xavier University between 1957 and 1960 and graduated with a BA and B.Ed. He then went on to receive his MA in 1961 from the University of New Brunswick and his PhD in 1968 from the University of Notre Dame. A specialist in British literature of the nineteenth century, MacLeod taught English for three years at Indiana University before accepting a post in 1969 at the University of Windsor as professor of English and creative writing. During the summer, his family resides in Cape Breton Island, where he spends part of his time "writing in a cliff-top cabin looking west towards Prince Edward Island."
MacLeod's published works include the 1976 short story collection The Lost Salt Gift of Blood and the 1986 As Birds Bring Forth the Sun and Other Stories. All of the stories in these two volumes along with his other published stories are included in MacLeod's 2000 collection Island. Among other awards, Macleod won the International IMPAC Dublin Literary Award for his 1999 novel No Great Mischief.
On December 4, 2009, MacLeod received the PEN/Malamud Award for Short Fiction along with Amy Hempel.