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A key figure in literary circles, Munro was a friend of the writers J. M. Barrie, John Buchan, Robert Bontine Cunninghame Graham and Joseph Conrad, and the artists Edward A. Hornel, George Houston, Pittendrigh MacGillivray and Robert Macaulay Stevenson. He was an early promoter of the works of both Conrad and Rudyard Kipling.

Munro published several novels under his own name, most but not all historical novels with a Highland setting. These include John Splendid and Doom Castle, but the best is generally considered to be The New Road (1914). It is set around the time of the Jacobite rebellions, and the title refers to the road built by General Wade through the central Highlands from Stirling to Inverness, now the A9. The central character is Aeneas Macmaster, a young man who travels north to investigate his fathers's disappearance and presumed death several years earlier. It is a revisionist account of that period, which attempts to debunk the cult of Jacobites and Highlanders, and is sympathetic to Clan Campbell, often seen as the villains of that period. (Munro came from Inveraray, the Campbells' capital.) The BBC produced a five-part TV serial version in 1973, with John Grieve as Sandy Duncanson, the villain of the story.

His obituaries commonly claimed him to be the successor of Robert Louis Stevenson, and at his memorial sevice at Glasgow Cathedral, the noted critic Lauchlan MacLean Watt descibed Munro as "the greatest Scottish novelist since Sir Walter Scott". However, after his death his serious novels faded from view (with the partial exception of The New Road) and he became mainly remembered as the creator of Para Handy. This process of revising the importance of Munro's work was accelerated by Hugh MacDiarmid becoming a detractor of Munro's style.