Thompson began her career in the 1930s as a singer and choral director for radio. Her first big break was as a regular singer on The Bing Crosby-Woodbury Show (CBS, 1933-34). This led to a regular spot on The Fred Waring-Ford Dealers Show (NBC, 1934-35) and then, with conductor Lennie Hayton, she co-founded The Lucky Strike Hit Parade (CBS, 1935) where she met (and later married) trombonist Jack Jenney. Kay Thompson and Her Rhythm Singers joined André Kostelanetz and His Orchestra for the hit series The Chesterfield Radio Program (CBS, 1936), followed by It's Chesterfield Time (CBS, 1937) for which Kay and her large choir were teamed with Hal Kemp and His Orchestra. For her motion picture debut, Kay and her choir performed two songs in the Republic Pictures musical Manhattan Merry-Go-Round (1937). In 1939, she reunited with André Kostelanetz for Tune-Up Time (CBS), a show that was produced by radio legend William Spier (who later married Kay in 1942). On an installment of Tune-Up Time in April 1939, 16-year-old Judy Garland was a guest. It was at this time that Kay first met and worked with Judy, developing a close personal friendship and professional association that lasted the rest of Garland's life.

In 1943, Kay signed an exclusive contract with MGM to become the studio's top vocal arranger, vocal coach, and choral director. She served as main vocal arranger for many of producer Arthur Freed's MGM musicals and as vocal coach to such stars as Judy Garland, Lena Horne, Frank Sinatra, and June Allyson. A wealth of information examining Thompson's contributions to Freed's musicals is found in Hugh Fordin's "The World of Entertainment!: Hollywood's Greatest Musicals" (1975).

Thompson was the vocal arranger for Ziegfeld Follies (1946), The Harvey Girls (1946), Till the Clouds Roll By (1946), Good News (1947) and other films. After working on The Pirate (1948) with Judy Garland and Gene Kelly, she left MGM to create the night club act: "Kay Thompson and the Williams Brothers" (Bob, Don, Dick, and Andy Williams). They toured the country's nightclubs and cabarets with great success, smashing house records with their jazz-based harmonies and comedic gymnastics. Kay wrote their songs and Robert Alton did the original choreography for the act.

Thompson, who lived at the Plaza Hotel in New York City, became most notable as the author of the Eloise series of children's books, which were partly inspired by the antics of her goddaughter Liza Minnelli, daughter of Judy Garland and film director Vincente Minnelli, but when asked if this was true responded, "I am Eloise". The four books in the series, illustrated by Hilary Knight, are Eloise (Simon & Schuster, 1955), Eloise in Paris (Simon & Schuster, 1957), Eloise at Christmastime (Random House, 1958) and Eloise in Moscow (Simon & Schuster, 1959). They follow the adventures of the precocious six-year-old girl who lives at The Plaza. All were bestsellers upon release and have been adapted into television projects. She also composed and performed a Top 40 hit song, "Eloise" (Cadence Records, 1956). A fifth book, Eloise Takes a Bawth was posthumously published by Simon & Schuster in 2002, culled from Thompson's original manuscripts once slated for 1964 publication by Harper & Row. However, at the time, Thompson was burned out on Eloise; she blocked publication and took all but the first book out of print, drastically reducing the income of her collaborator.

As an actress on the silver screen, Thompson made her mark as fashion editor Maggie Prescott in the musical Funny Face (1957), with Audrey Hepburn and Fred Astaire. Reunited with her colleagues from MGM, producer/songwriter Roger Edens and director Stanley Donen, Thompson garnered critical praise for her stylish turn as an editor based on real-life Harper's Bazaar editor Diana Vreeland, kicking off the film with her splashy "Think Pink!" and stealing the spotlight in duets with Astaire and Hepburn. In a 6 December 2006 interview on Turner Classic Movies, Donen said that Funny Face was made at Paramount with a primarily MGM crew, including Donen, Edens and Thompson, because Paramount Pictures would not release Hepburn for any film except one made at Paramount.

As a singer, Thompson made very few records. In 1935, she recorded four sides for Brunswick and another four sides for Victor. The Brunswick sides ("You Hit The Spot", "You Let Me Down", "Don't Mention Love To Me" and "Out Of Sight, Out Of Mind") are about as good as any example of sophisticated cabaret singing in the mid-1930s. She later recorded for Capitol, Columbia, Decca, and, most importantly, for MGM Records which issued the one and only complete album of songs by Kay Thompson in 1954.

In February 1956, Kay Thompson wrote and recorded the song "Eloise" at Cadence Records with an orchestra conducted by Archie Bleyer. The song debuted on March 10, 1956, and became a Top 40 hit, selling over 100,000 copies.

Throughout the 1950s and early 1960s, Kay mentored the solo career of the young Andy Williams. She helped land him a regular singing spot on NBC-TV's new late-night series, The Tonight Show, hosted by Steve Allen. She got her friend Archie Bleyer to add Andy to the roster of artists on his label Cadence Records where she wrote many of the songs Andy recorded, including the 1958 Top 20 hit Promise Me, Love. Though it had been denied for decades, Williams finally admitted in his 2009 memoir, Moon River and Me (Viking Press), that he and Kay had been secret lovers for several years, despite the 18 year age gap between them.

Thompson served as creative consultant and vocal arranger for Judy Garland's highly rated 1962 television special with Frank Sinatra and Dean Martin, and she kept busy with nightclub and television performances, as well as overseeing her successful "Eloise" franchise.

In 1962, Thompson moved to Rome where she was cast to play party hostess Angela Dunning (a fictionalized version of Perle Mesta) in Blake Edwards' The Pink Panther. However, following the departures of Audrey Hepburn, Ava Gardner, and Peter Ustinov, columnist Louella Parsons reported that Kay "flipped her wig and left the set" in a dispute over her wardrobe and radical script revisions. Her musical number was reassigned to Fran Jeffries and the rest of the truncated part was played by Brenda de Banzie.

Kay returned to live in New York in 1969. Immediately following the death of Judy Garland, Kay appeared with her goddaughter Liza Minnelli in Otto Preminger's Tell Me That You Love Me, Junie Moon (Paramount, 1970).

In 1974, Thompson directed a groundbreaking fashion show at the Palace of Versailles featuring performances by Liza Minnelli and the collections of Halston, Bill Blass, Oscar de la Renta, and Anne Klein.

Kay eventually moved into Minnelli's Upper East Side penthouse in New York City, where she died in 1998.

The original soundtrack to Funny Face has been remastered and reissued. Most of her exceptional work for MGM has been preserved and released on Rhino/Turner Classic Movies original soundtrack series, including little-known contributions she did for films such as Meet the People (1944) and Abbott and Costello In Hollywood (1945). Her 1930s recordings are available on the CD Kay Thompson: Queen of Swing Vocal & Her Rhythm Singers (Baldwin Street Records), produced and annotated by Ted Ono. The rest of her recording career is compiled on the 3-CD box set Think Pink! A Kay Thompson Party (Sepia Records), produced and annotated by Sam Irvin.

In 2003, Kay Thompson was inducted into the St. Louis Walk of Fame.

It has been written that Thompson's hyperactive, always positive personality is similar to the famous fictional Auntie Mame (although Mame had a scatterbrained aspect). Thompson's real-life personality can also be seen in her characterization in the film Funny Face.

Liza Minnelli recreated Thompson's nightclub act for her 2009 Tony Award-winning Broadway event, Liza's at the Palace. A CD cast recording, a PBS television special, and a DVD followed.

Liza's at The Palace opened at New York's legendary Palace theater, an affectionate salute to her godmother Kay Thompson. Supported by a quartet of dynamic singer/dancers standing in for the original Williams Brothers, Minnelli performed songs (with the original vocal arrangements) from Thompson's famous act, including "I Love a Violin", "Clap Yo' Hands", "Jubilee Time", and "Hello Hello".

One of Thompson's sisters, Blanche Hurd, was designated as her literary heir, and was the commanding interest in the Eloise franchise beginning in 1998. After Blanche's death in 2002, the estate passed to Hurd's two children.

In the 2001 ABC miniseries "Life With Judy Garland: Me & My Shadows", Kay Thompson was portrayed by actress Sonja Smits.

Hollywood director Sam Irvin has written a comprehensive biography, Kay Thompson: From Funny Face to Eloise, scheduled for November 2010 publication by Simon & Schuster.