Rambeau was born in San Francisco, California to Marcel and Lilian Garlinda (née Kindelberger) Rambeau. Her parents separated when she was a child. She and her mother went to Nome, Alaska where young Marjorie dressed as a boy, sang and played the banjo in saloons and music halls. Her mother insisted she dress as a boy to thwart amorous attention from drunken grown men in such a wild and woolly outpost as Nome. She began performing on the stage at the age of 12. She attained theatrical experience in a rambling early life as a strolling player. Finally she made her Broadway debut on March 10, 1913 in a tryout of Willard Mack's play, Kick In.

In her youth she was a Broadway leading lady. In 1921, Dorothy Parker memorialized her in verse:

If all the tears you shed so lavishly / Were gathered, as they left each brimming eye. / And were collected in a crystal sea, / The envious ocean would curl up and dry— / So awful in its mightiness, that lake, / So fathomless, that clear and salty deep. / For, oh, it seems your gentle heart must break, / To see you weep. …[4]

Her silent films with the Mutual company included Mary Moreland and The Greater Woman (1917). The films were not major successes but did expose Rambeau to film audiences. By the time talkies came along she was in her early forties and she began to take on character roles in films such as Min and Bill, The Secret Six, Laughing Sinners,Grand Canary, Joe Palooka, and Primrose Path, for which she was nominated for the Academy Award for Best Supporting Actress.

In 1940, Rambeau had the title role in Tugboat Annie Sails Again as well as second billing under Wallace Beery (the co-star of the original Tugboat Annie) in 20 Mule Team. Other films includedTobacco Road, A Man Called Peter, and Broadway. In 1953, she was again nominated for an Oscar, this time for Torch Song. In 1957, she appeared in a supporting role in Man of a Thousand Faces about the life of Lon Chaney, although she never worked with the real Chaney in silent films.

For her contribution to the motion picture industry, Rambeau has a star on the Hollywood Walk of Fame at 6336 Hollywood Blvd.

According to author and New York Mirror theatre critic Bernard Sobel the Reuben sandwich was invented for Marjorie Rambeau upon a visit to Reuben's Restaurant and Delicatessen in New York City.[5]

Rambeau was married three times but bore no children:

The first was in 1913 to Canadian writer, actor, and director Willard Mack. They divorced in 1917.
She then married another actor, Hugh Dillman McGaughey, in 1919. They divorced in 1923. Dillman later married Anna Thompson Dodge, widow of automobile magnate Horace Elgin Dodge, Sr., and one of the wealthiest women in the world.
Rambeau's last marriage was to Francis Asbury Gudger in 1931, with whom she remained until his death in 1967. Gudger was from Asheville, North Carolina. In the winters they often stayed there, and in the summer they lived in Sebring, Florida. His previous wife was killed in an automobile accident in Tampa two years before, but Rambeau and Gudger had been sweethearts years before when the former was the "toast of Broadway".[6]

She died at her home in Palm Springs, California and was buried in the Desert Memorial Park