Margulis was educated at the university in her native city of Chicago, at Wisconsin, and at Berkeley where she obtained her PhD in 1965. After working briefly at Brandeis she moved to Boston University in 1966 and served there as professor of biology from 1977 to 1988. She became Distinguished Professor of the University of Massachusetts in 1988.

With the success of modern biochemistry, genetics, and cytology it became apparent that there was a fundamental division in nature between cells with nuclei (eukaryotes) and those without (prokaryotes). In terms of metabolism, chemistry, genetics, and structure, higher organisms differ radically from bacteria and blue-green algae, the prokaryotes. She studied the question of how eukaryotes evolve and her answer, in terms of hereditary endosymbiosis, was fully formulated in her Origin of Eukaryotic Cells (1970). She argued that eukaryotes are basically colonies of prokaryotes and that such features of cells as mitochondria were once free-living bacteria but have, “over a long period of time, established a hereditary symbiosis with ancestral hosts that ultimately evolved into animal cells.” Similarly she proposes that chloroplasts and flagella evolved in the same way.

The actual evolutionary sequence proposed begins with a ‘fermenting bacterium’ entering into a symbiotic relationship with some oxygen-using bacteria, the first mitochondria. Such a complex might join with “a second group of symbionts, flagellum-like bacteria comparable to modern spirochaetes,” which, attached to the host's surface, would greatly increase its motility.

As Margulis points out, the proof for such an imaginative model requires that the cell organelles are separated, cultured independently, and then brought back into symbiotic association again. So far no one has managed to grow an organelle outside the cell. Margulis published (with Karlene Schwartz) “a catalog of the world's living diversity” in Five Kingdoms (1982).