Pearl-McPhee's grandmother, a professional knitter, taught her to knit when she was four years old. She and her husband, Joseph "Joe" Dunphy, have three daughters, Amanda (b. May 30, 1989), Megan (b. August 15, 1991), and Samantha (b. February 17, 1994). Stephanie and Joe were married on September 30, 2006.

Pearl-McPhee has contributed articles and patterns to knitting magazines such as Cast On, Interweave Knits, Knitty, Stranded, and Spin-Off. She also contributed a chapter to the book Knitlit Too. In addition, she has written five books on knitting.

One of Pearl-McPhee's best known works is her blog, which also carries the moniker "The Yarn Harlot". In 2004, she founded Tricoteuses sans Frontières (Knitters without Borders), a group dedicated to raising money for the non-profit Médecins Sans Frontières (Doctors without Borders). As of the 6th anniversary of Pearl-McPhee's blog (January 2010), they have contributed over $1,000,000 CAD to MSF/DWB.

In 2006 she started the 2006 Knitting Olympics, a competition for knitters to start and finish one challenging project during the timeframe of the 2006 Winter Olympics. Over 4,000 knitters worldwide participated. The event was also the catalyst for a 2006 Crochet Olympics, which held the same rules but was organized elsewhere.

Pearl-McPhee often makes personal appearances at conventions, book stores and other craft-related events where she shares her view of life and knitting with fellow crafters. Her 2008 tour included venues across the USA and Canada, including branches of Barnes & Noble and the Borders Group, independent bookshops, knitting shops and fibre festivals. The tour included her first ever appearance in Europe, at I Knit London's I Knit Day in September 2008.

Pearl-McPhee originated the word "kinnear" on August 2, 2007, on her blog. Now cited in the Urban Dictionary and in The New York Times' 2007 Word in Review, it is defined as "kinnear v. To take a candid photograph surreptitiously, especially by holding the camera low and out of the line of sight." "Kinnearing" was originated when she attempted to take a picture of Greg Kinnear at an airport while on her way to Boston, MA. When Kinnear learned of this, he started to try kinnearing others, including his "Flash of Genius" costar Alan Alda . He showed his attempts on "Late Night With Conan O'Brien", where, in the same interview, he declared that Pearl-McPhee is "the Michael Jordan of knitting."