His hometown was Columbus, Ohio. He graduated from Yale University, where he became a brother to the Delta Kappa Epsilon fraternity (Phi chapter), in 1916 and was in the Naval Reserves in World War I.

After the war he started to write and found success with A Parody Outline of History, a satire of The Outline of History (1920) by H. G. Wells. This led him to becoming a member of the Algonquin Round Table. Around that time a friend of his got him interested in theater and he became a noted playwright on Broadway in the 1920s. He was friends with Dorothy Parker, Robert Benchley, George S. Kaufman, and Ernest Hemingway (he was the model for Bill Gorton in Hemingway's The Sun Also Rises). In 1924, he wrote Mr. and Mrs. Haddock Abroad for the publishing house George H. Doran. It was a snarky send up of the ugly American tourist.

He became interested in adapting some of his plays to film, but on first entering Hollywood he had to adapt the plays of others as his own were initially shelved. Once there he mostly wrote, but he also had a small part in the film Not So Dumb. By the 1930s he had become known primarily as a sceenwriter and won an Academy Award for The Philadelphia Story (1940). As World War II approached, he became a member of the Hollywood Anti-Nazi League, a Communist front. During the Second Red Scare Stewart was blacklisted in 1950 and the following year he and his wife, activist and writer Ella Winter (they had married in 1939), emigrated to England. His 1975 memoir is entitled By a Stroke of Luck.

He died in London in 1980. His widow died the same year. Stewart had two sons from a previous marriage.

Stewart was portrayed by the actor and playwright David Gow in the 1994 film Mrs. Parker and the Vicious Circle.

As a writer

• Love and Death' (1975) (uncredited)
• Summertime (1955) (uncredited)
• The Prisoner of Zenda (1952) (additional dialogue) (originally uncredited)
• Edward, My Son (1949)
• Cass Timberlane (1947) (adaptation)
• Life with Father (1947)
• Without Love (1945)
• Forever and a Day (1943)
• Keeper of the Flame (1942) (screenplay)
• Tales of Manhattan (1942)
• Smilin' Through (1941) (screenplay)
• A Woman's Face (1941)
• That Uncertain Feeling (1941) (screenplay), aka Ernst Lubitsch's That Uncertain Feeling (USA: complete title)
• Kitty Foyle: The Natural History of a Woman (1940) (additional dialogue), aka Kitty Foyle (USA: short title)
• The Philadelphia Story (1940) (screenplay)
• The Night of Nights (1939) (also story)
• Love Affair (1939)
• Marie Antoinette (1938) (screenplay)
• Holiday (1938) (screenplay)
• The Prisoner of Zenda (1937) (additional dialogue)
• Dinner at Eight (1933) (additional dialogue)
• Another Language (1933)
• The White Sister (1933)
• Smilin' Through (1932) (dialogue)
• Rebound (1931) (based on his play of the same name)
• Tarnished Lady (1931)
• Finn and Hattie (1931) (novel Mr and Mrs Haddock Abroad)
• Laughter (1930)
• Humorous Flights (1929)
• Father William (1929)
• Traffic Regulations (1929)
• Brown of Harvard (1926) (adaptation)

As an actor

• Not So Dumb (1930) .... Skylar Van Dyke/Horace Patterson
• Night Club (1929/I)
• Humorous Flights (1929) .... Donald Ogden Stewart
• Holiday (1928) .... Nick Potter