She was born Gladys Mary Meredith in the Shropshire village of Leighton, 8 miles (13 km) southeast of Shrewsbury. Her father was a schoolteacher, who inspired his daughter with his own love of literature and the local countryside. On her mother's side, she was descended from a family related to Sir Walter Scott. Mary loved to explore the countryside around her home, and developed a gift of detailed observation and description, of both people and places, which infuses her poetry and prose.

At the age of 20, she developed symptoms of Graves' disease, a thyroid disorder (which resulted in bulging protuberant eyes and a throat goitre), and was the cause of ill health throughout her life and probably contributed to her early death. This affliction gave her great empathy with the suffering, and finds its fictional counterpart in the disfiguring harelip of Prue Sarn, the heroine of Precious Bane.

In 1912, she married Henry Webb, a teacher who at first supported her literary interests. They lived for a time in Weston-super-Mare, before moving back to Mary's beloved Shropshire where they worked as market gardeners until Henry secured a job as a teacher at the Priory School.

The couple lived briefly in Rose Cottage near the village of Pontesbury between the years 1914 and 1916, during which time she wrote The Golden Arrow. Her time in the village was commemorated in 1957 by the opening of the Mary Webb School

The publication of The Golden Arrow in 1917 enabled them to move to Lyth Hill, Bayston Hill a place Mary loved, buying a plot of land and building Spring Cottage.

In 1921, they bought a second property in London hoping that she would be able to achieve greater literary recognition. This, however, did not happen. By 1927, she was suffering increasingly bad health, her marriage was failing, and she returned to Spring Cottage alone. She died at St Leonards on Sea, aged 46.

In her own lifetime, she won the Prix Femina Vie Heureuse for Precious Bane, but her output was not otherwise greatly esteemed. It was only after her death that Stanley Baldwin, then Britain's Prime Minister, brought about her commercial success through his approbation; at a Literary Fund dinner in 1928, Baldwin referred to her as a neglected genius. Consequently her collected works were republished in a standard edition by Jonathan Cape, becoming best sellers in the 1930s and running into many editions.

Her work is still widely admired. Three of her novels have been reprinted in recent times by Virago; these, like her writing in general, are notable for their descriptions of nature, and of human psychology.

Stella Gibbons's 1932 novel Cold Comfort Farm was a parody of Webb's work, Literary Encyclopedia: Cold Comfort Farm as well as of other "loam and lovechild" writers like Sheila Kaye-Smith and Mary E. Mann and, further back, Thomas Hardy. In a 1966 Punch article, Gibbons observed:

The large agonised faces in Mary Webb's book annoyed me ... I did not believe people were any more despairing in Herefordshire [sic] than in Camden Town.

The museum at the Tourist Information Centre in Much Wenlock includes a lot of information on Mary Webb including a display of photographs of the filming of her novel Gone to Earth in 1950.

Her cottage on Lyth Hill can still be seen, but has been much extended and modernised.

Gone to Earth is the story of Hazel Woodus, a child of nature with a pet fox who (that is, Hazel) simply wants to be herself, living among the remote Shropshire hills of the Welsh Marches with her harpist coffin-building father, but gets drawn into the world of normal human relationships through her great beauty, marrying a local church minister, but also becoming the object of the local fox-hunting squire's obsessive love for her. She casts herself down a mineshaft to escape, clutching her beloved fox. Gone to Earth was filmed in 1950 by Michael Powell and Emeric Pressburger, starring Jennifer Jones as Hazel Woodus. However, it was later re-edited, shortened and retitled for its American release, and fell into relative obscurity. In 1985, the full 110-minute restored version was released by the National Film Archive, to great acclaim. A DVD is available.

Precious Bane is set in the years after the Battle of Waterloo, and tells the story of Prue Sarn, disfigured by a harelip which her superstitious neighbours regard as a sign that she is a witch, and how she falls in love with a visiting weaver, Kester Woodseaves. It was first produced as a six part BBC television drama series in 1957, starring Patrick Troughton and Daphne Slater. It was then adapted as a single play by French Television (ORTF) in 1968, with Dominique Labourier as Prue, Josep Maria Flotats as Gedeon and Pierre Vaneck as Kester; the director was Claude Santelli; the title was 'Sarn' (French title of the novel). TV channel TCM have shown this film several times in 2008. The most recent adaptation was as a television play by the BBC in 1989, with Janet McTeer as Prue, Clive Owen as her brother Gideon, and John Bowe as Kester.