Margaret MacMillan was born to Dr. Robert MacMillan and Eluned Carey Evans. Her maternal grandfather was Dr. Thomas John Carey Evans of the Indian Medical Service. The senior Evans served as personal physician to Rufus Isaacs, 1st Marquess of Reading during the latter's term as Viceroy of India (1921—1926). Her maternal grandmother, Olwen Elizabeth Lloyd George, was a daughter of David Lloyd George, Prime Minister of the United Kingdom and his first wife Margaret Owen.

MacMillan received an Honours B.A. in history from the University of Toronto (attending Trinity College, where she would later become Provost) and a B.Phil. in Politics and D.Phil. (1974) at Oxford University (attending St. Hilda's College and later St. Antony's College, where she became Warden in 2007). Her doctoral dissertation, also completed at Oxford, was on the social and political perspectives of the British in India. From 1975 to 2002 she was a professor of history at Ryerson University in Toronto, including five years as department chair. She is the author of Women of the Raj, a selection of the "History Book Club." In addition to numerous articles and reviews on a variety of Canadian and world affairs, MacMillan has co-edited books dealing with Canada's international relations, including with NATO, and with Canadian-Australian relations.

From 1995 to 2003, MacMillan co-edited the International Journal, published by the Canadian Institute of International Affairs. Since 1995, she has served as a member of the National Board of Directors of the CIIA. She was the Young Memorial Visitor at Royal Military College of Canada in 2004 and delivered the J.D. Young Memorial Lecture on November 24, 2004.

MacMillan's research has focused on the British Empire in the late nineteenth and early twentieth centuries and on international relations in the twentieth century. Over the course of her career, she has taught a range of courses on the history of international relations. MacMillan served as Provost of Trinity College at the University of Toronto from 2002-2007. She was appointed Warden of St Antony's College at Oxford University in 2007.