Macdonald was born and raised in Quebec City. In the early 1970s, Macdonald attended grade school where his parents taught at Alexander Wolff School, on Canadian Forces Base Valcartier, outside Quebec City. Macdonald has said that he was a student in his father's class, and that he had to call him "Mr. Macdonald" while in class. His father, often described as a very strict man, was his homeroom teacher for two years (grades 6 and 7). After completing 7th grade, Macdonald attended Quebec High School in Quebec City. Canadian CBC News journalist Neil Macdonald is his brother.
Macdonald joined the cast of NBC's Saturday Night Live (SNL) television program in 1993, where he performed impressions of Larry King, Burt Reynolds, David Letterman, Charles Kuralt and Bob Dole, among others. Following Kevin Nealon's departure from SNL, Macdonald anchored the segment Weekend Update. Chevy Chase, the first anchor of Weekend Update, has opined that Macdonald was the "best Weekend Update anchor since - well - Chevy Chase".
Macdonald's version of Weekend Update often included repeated references to prison rape, crack whores and the Germans' love of Baywatch star David Hasselhoff. Macdonald would occasionally deliver a piece of news, then take out his personal compact tape recorder and leave a "note to self" relevant to what he just discussed. He also commonly and inexplicably used Frank Stallone as a non sequitur punchline. Macdonald repeatedly ridiculed public figures such as Michael Jackson and O. J. Simpson. Throughout Simpson's trial for murder, Macdonald constantly pilloried the former football star, often heavily implying Simpson was guilty of the brutal slaying of his wife Nicole and her friend Ronald Goldman. In the broadcast following Simpson's acquittal, Macdonald opened Weekend Update by saying: "Well, it's official: murder is legal in the state of California." During the February 24, 1996 episode, Macdonald made a controversial joke about the sentencing of John Lotter, one of the two men who committed the notorious murder of Teena Brandon: "In Nebraska, a man was sentenced to death for killing a female crossdresser, who accused him of rape, and two of her friends. Excuse me if this sounds harsh, but in my mind, they all deserved to die."
After the announcement that Michael Jackson and Lisa Marie Presley planned to divorce, Macdonald joked about their irreconcilable differences on Weekend Update: "She's more of a stay-at-home type, and he's more of a homosexual pedophile." He followed this up a few episodes later with a report about the singer's recent collapse and hospitalization. Referring to a report of how Jackson had decorated his hospital room with giant photographs of Shirley Temple, Macdonald remarked that viewers should not get the wrong idea, adding, "We'd like to remind you that Michael Jackson is, in fact, a homosexual pedophile." The joke elicited audible gasps from some audience members. He responded to this by saying, "What? He is a homosexual pedophile."
Macdonald's time with Saturday Night Live effectively ended in late 1997, when he was fired from the Weekend Update segment upon the insistence of NBC West Coast Executive Don Ohlmeyer, who pressured the producers to remove him, explaining that Macdonald was "not funny." Some believe that Don Ohlmeyer's friendship with O.J. Simpson — a celebrity whom Macdonald often antagonized on the show — may have fueled Ohlmeyer's decision, but Macdonald has been quoted as saying that he "finds that thesis 'weird' and takes Ohlmeyer's explanation at face value".
On February 28, 1998, one of his last appearances on SNL occurred as host of a fictitious TV show called Who's More Grizzled?, who asked questions of "mountain men" played by that night's host Garth Brooks and special guest Robert Duvall. In the sketch, Brooks's character said to Macdonald's character, "I don't much care for you," to which Macdonald replied, "A lot of people don't."
In a Late Show with David Letterman interview, Macdonald said that after being fired, he could not "do anything else on any competing show."
Macdonald went on the Celebrity Jeopardy! sketch on the 34th season finale of SNL when Will Ferrell hosted. Macdonald reprised the impression of Burt Reynolds that he did when he was a regular cast member.