He was born in Cork, and was educated at a school there. He began his career as a journalist, aged 18, in Cork. From 1853 to 1859 he was in Liverpool, on the staff of the Northern Daily Times, during which period he married (in March 1855) Charlotte Ailman.

In 1860 he moved to London, as parliamentary reporter to The Morning Star, of which he became editor in 1864.

He gave up his post in 1868, and, after a lecturing tour in the United States, joined the staff of the Daily News as leader-writer in 1870. In this capacity he became one of the most useful and respected upholders of the liberal politics of the time. He lectured again in America in 1870-1871, and again in 1886-1887.

McCarthy was first elected to Parliament at a by-election on 4 April 1879, when he was returned unopposed as a Home Rule League MP for County Longford. He was re-elected unopposed as a Parnellite Home Ruler in 1880, and when the two-seat Longford constituency was splitto two divisions under the Redistribution of Seats Act, he was elected as an Irish Parliamentary Party member for the new single-seat Northern division of Longford. His sole opponent, a Conservative, won only 6% of the votes.

At the 1886 general election, he was returned unopposed in North Longford, but had also stood in Derry City, where he was declared to have lost to the Unionist candidate by the narrow margin of 1778 votes to 1781. However, the result was later overturned on peition, and McCarthy opted to sit for Derry City.

During the divorce controversy surrounding Charles Stewart Parnell in November 1890, the British Prime Minister Gladstone expressed a warning, given to Justin McCarthy as intermediary, that if Parnell retained leadership of the Irish Parliamentary Party it would mean the loss of the next election, the end of their alliance and Home Rule. When the annual party leadership election meeting was called later that month, this threat was somehow not conveyed to the members, who re-elected Parnell leader of the Party. After a further historical meeting of the Irish Party MPs early December, Parnell refused to retire, and the Party divided. McCarthy became chairman of the Anti-Parnellite group, or the Irish National Federation for a year in 1891-1892; but his nationalism was of a temperate and orderly kind, and though his personal distinction singled him out for the chairmanship during the party dissensions of this period, he was in no active sense the political leader.

At the 1892 general election, McCarthy again stood both in North Longford and in Derry City. In each seat there was a two-way contest between the Anti-Parnellite McCarthy and a Unionist candidate, but this time the narrow Unionist victory in Derry (by 1986 votes to 1960) was not overturned, and McCarthy sat for North Longford, where he had won over 93% of the votes. He was returned unopposed for North Longford in 1895, and stood down from Parliament at the 1900 general election

His real bent was towards literature. His earliest publications were novels, some of which, such as A Fair Saxon (1873), Dear Lady Disdain (1875), Miss Misanthrope (1878), Donna Quixote (1879), attained considerable popularity. His most important work is his History of Our Own Times (vols. i.iv., 1879—1880; vol. v., 1897),which treats of the period between Queen Victoria's accession and her Diamond Jubilee. Easily and delightfully written, and on the whole eminently sane and moderate, these volumes form a brilliant piece of narrative from a Liberal standpoint. He also began a History of the Four Georges (1884 1901), of which the latter half was written by his son, Justin Huntly McCarthy.

He also collaborated on three novels with Rosa Campbell Praed: The Right Honourable (1886), The Rebel Rose (issued anonymously in 1888 but appeared in their joint names in two later editions under the title, The Rival Princess), and The Ladies' Gallery (1888). They also collaborated on The Grey River, a book on the Thames, which was illustrated with etchings by Mortimer Menpes.