Born in Brooklyn, New York, McCourt was raised in Limerick, Ireland. He returned to the United States in 1952. He has four children: Siobhan, Malachy III, Conor (a New York City police officer and documentary maker), and Cormac, the latter two by his second wife Diana. He also has a stepdaughter, Nina. He was portrayed by Peter Halpin in the film version of his brother's memoir Angela's Ashes. He is also one of the four founding members of the Manhattan Rugby Football Club in 1960.

He has acted on stage, on television and in several movies, including The Molly Maguires. He has appeared on three New York City-based soap operas: Ryan's Hope, Search for Tomorrow, and One Life to Live. He is also known for his annual Christmas-time appearances on All My Children as Father Clarence, a priest who shows up to give inspirational advice to Pine Valley citizens.

In the 1970s he had a talk show on WMCA.

In recent years he has occasionally appeared on various programs on New York City's political radio station, WBAI. Among the shows on which he has appeared has been Radio Free Éireann. He is also a regular guest artist at the Scranton Public Theatre in Pennsylvania, having performed in Inherit the Wind , Love Letters and A Couple of Blaguards which he co-wrote with brother Frank McCourt. Currently, Malachy has been hosting a call-in radio forum on WBAI, airing on Sunday mornings at 11am. He also had a short-lived role as a Catholic priest on the critically acclaimed HBO prison drama Oz. He gained fame in New York as the owner of Malachy's, a bar on Third Avenue that became a legend in its time, where celebrities and others gathered nightly in an atmosphere of unmatched conviviality. One of his frequent patrons was actor and friend Richard Harris who although famous took some downtime to bartend for McCourt. McCourt played Francis Preston Blair in Gods and Generals (2003).

McCourt also wrote two memoirs titled, respectively, A Monk Swimming and Singing My Him Song, detailing his life in Ireland and later return to the United States where despite limited education he operated a successful Manhattan tavern frequented by entertainment celebrities. He also authored a book on the history of the much loved Irish ballad Danny Boy.

On Tuesday, 18 April 2006, McCourt announced that he would seek to become governor of New York in the November 2006 election as a Green Party candidate. Running under the slogan "Don't waste your vote, give it to me", McCourt promised to recall the New York National Guard from Iraq, to make public education free through college, and to institute a statewide comprehensive "sickness care" system. McCourt polled at 5% in a 10 October Zogby poll, versus 25% for Republican John Faso and 63% for Democrat Eliot Spitzer. McCourt was endorsed by Cindy Sheehan, mother of a fallen soldier in the Iraq War. The League of Women Voters excluded him from candidate debates. He came in a distant third in the general election, received 40,729 votes (or just under 1%), 9,271 votes short of what was required to gain automatic access in the 2010 election.