MacLeod, born the son of a clergyman in Cluny, Scotland, was educated at Aberdeen Grammar School and Aberdeen University, where he gained his MD in 1898. After postgraduate work in Leipzig and hospital work in London, MacLeod moved to America in 1903 as professor of physiology at Western Reserve University, Cleveland, Ohio. In 1918 he accepted a similar post at the University of Toronto but returned to Scotland in 1928 to become professor of physiology at Aberdeen.

Before his move to Toronto, MacLeod worked mainly on problems of carbohydrate metabolism, producing from 1907 a series of papers entitled Studies in Experimental Glycosuria. He also produced a standard textbook, Physiology and Biochemistry in Modern Medicine (1918), which went through seven editions before his death.

However his most significant work arose from his association at Toronto with the young surgeon Frederick Banting. In early 1921 Banting asked if he could attempt to extract the pancreatic hormone believed to control the level of sugar in the blood. MacLeod apparently did his best to discourage Banting, pointing out to him that expert physiologists had made no progress with such a task over many years, but eventually offered him use of the laboratory and the help of a young student, Charles Best, as a research assistant.

MacLeod left shortly afterward for Scotland, returning in September to find that the two researchers had succeeded in extracting a substance that controlled the level of blood sugar in dogs whose pancreases had been removed. Realizing the importance of obtaining as pure an extract as possible, MacLeod arranged for the laboratory's chemist, James Collip, to work on the problem. By January 1922, Collip had been so successful that they were ready to try the new hormone, named insulin by MacLeod, on a human patient.

In 1923 Banting and MacLeod were awarded the Nobel Prize for physiology or medicine for their discovery of insulin. Banting, distressed that his young colleague Best was apparently to receive no recognition, wished to refuse the prize. He finally decided to accept and shared the money with Best. MacLeod, too, was presumably feeling some discomfort at his award for he shared his prize with Collip.