She was educated at Bennington College, Mannes College of Music, Sarah Lawrence College, Bronxville, New York, and the Houston-Galveston (Texas) Psychoanalytic Institute, Baylor College of Medicine, where she was certified as a psychoanalyst in 1986. Originally Macdonald intended to make a profession of singing, from 1953 to 1966. She then taught English at Sarah Lawrence College (1970—75) and Johns Hopkins University, (1975—78). In 1979 she founded the creative writing program at the University of Houston, serving as codirector. She was a member of the board of directors of the Association of Writers & Writing Programs.
She wrote the libretto for The Rehearsal (1978), an opera by Thomas Benjamin. In 1995, Macdonald coedited Connectionism and Philosophy of Psychology, with Graham Macdonald.