Born as Margaret Kies in Dubuque, Iowa, she was the eldest of six children of a pharmacist father who died in 1930. According to Tom Longden of the Des Moines Register, "Peg" was "a tomboy who liked to climb pear trees" and was a "roller-skating fiend." She graduated in 1930 from Visitation Academy in Dubuque.
After attending National Park Seminary in Washington, D.C., Lindsay convinced her parents to enroll her at the American Academy of Dramatic Arts in New York. She went abroad to England to make her stage debut. She appeared in plays such as Escape, Death Takes a Holiday, and The Romantic Age.
Lindsay was often mistaken as being British due to her convincing English accent, which impressed Universal Studios enough to sign her for their 1932 version of The Old Dark House. As James Robert Parish and William T. Leonard wrote in Hollywood Players: The Thirties (Arlington House, 1976), Lindsay returned to America and arrived in Hollywood, only to discover that Gloria Stuart had been cast in her role in the film. After some minor roles in Pre-Code films such as Christopher Strong and the groundbreaking Baby Face, which starred Barbara Stanwyck, Lindsay was cast in the Fox Film Corporation's award-winning Cavalcade. Lindsay was selected for a small but memorable role as Edith Harris, a doomed English bride whose honeymoon voyage takes place on the Titanic.
She won the role by backing up her British accent with an elaborate "biography" that claimed she was born in a London suburb, the daughter of a London broker who sent her to a London convent for her education. "Although I looked and talked English... to tell them I was actually from Iowa would have lost the assignment for me," she later explained.
Her work in Cavalcade earned her a contract at Warner Bros. where she became a reliable supporting player, working with Paul Muni, Errol Flynn, Henry Fonda, Warren William, Leslie Howard, George Arliss, Humphrey Bogart, Boris Karloff and Douglas Fairbanks, Jr. Lindsay was cast four times as the love interest of James Cagney in Warner films from 1933-1935. She appeared with Cagney in four films: Frisco Kid, Devil Dogs of the Air, G Men and Lady Killer.
Lindsay co-starred with Bette Davis in four Warners films: as Davis's sister in 1934's Fog Over Frisco; in 1935's Dangerous (for which Davis won her first Best Actress Academy Award); in Bordertown, co-starring Paul Muni, and, lastly, as Davis's rival for Henry Fonda's affections in Jezebel (1938), which earned Davis her second Best Actress Academy Award.
An example of her work in a leading role in lower budget films while at Warner Bros. was The Law in Her Hands (1936), a comedy in which she played a mob lawyer. As film historian John McCarty wrote, it was "that rarity among gangster films to offer a female in the male-dominated mouthpiece role." Author Roger Dooley identified the movie as "being the only film of the 1930s to concern itself with a pair of female legal partners". Made after the Motion Picture Production Code came into effect, however, The Law in Her Hands was forced into adopting "a reactionary stance towards the gender switch", and concluded with a plot twist that was the complete opposite of the Pre-Code period (1929–1934), when "female characters on the screen could say, do, and be whatever they wanted".
Perhaps Lindsay's most acclaimed film role was in The House of the Seven Gables in 1940, with George Sanders and Vincent Price. Directed by Joe May from a screenplay by Lester Cole, the film's musical score by Frank Skinner was nominated for an Academy Award. Price recalled that "Margaret Lindsay was a delight to work with and a very good actress."
Michael Brunas, John Brunas and Tom Weaver wrote in Universal Horrors: The Studio's Classic Films, 1931-46 that Lindsay "...one of the loveliest and most talented of '30s leading ladies, contributes a fine, mature performance that's probably the best, certainly the most striking, in the picture... [h]ad a Bette Davis played Hepzibah, this same performance would be hailed as a classic..."
In a 2004 Classic Images article about actor Jon Hall, film historian Colin Briggs wrote that a letter he had received from Lindsay indicated that her part in The House of the Seven Gables was her "favorite role." Lindsay's letter to Briggs also stated that the film she had the most fun with was 1947's The Vigilantes Return, in which she co-starred with Jon Hall. "...[That] role was a complete departure from my usual parts and I grabbed it... I even warbled a Mae West type ditty. As a man-chasing saloon singer after Jon Hall it was for me a totally extroverted style and I relished the opportunity... I have a framed still from that film on a wall in my home."
Her 1940s film series work in Hollywood included Columbia's first entry in its Crime Doctor series, as well as her continuing role as Nikki Porter in Columbia's Ellery Queen series (1940–42). Author Jon Tuska's affection for the Ellery Queen series mystified its star Ralph Bellamy. During an interview by Tuska for his 1978 book, The Detective in Hollywood, he remarked, "I'm one of the few who does [like the series]." "I don't know how ... They were such quickie pictures", Bellamy replied.
Jon Tuska cited Ellery Queen, Master Detective (1940) and Ellery Queen's Penthouse Mystery (1941) as the best of the Bellamy-Lindsay pairings. "The influence of The Thin Man series was apparent in reverse," Tuska noted about Ellery Queen's Penthouse Mystery. "Ellery and Nikki are unmarried but obviously in love with each other. Probably the biggest mystery ... is how Ellery ever gets a book written. Not only is Nikki attractive and perfectly willing to show off her figure ... but she also likes to write her own stories on Queen's time, and gets carried away doing her own investigations", Tuska opined.
Lindsay appeared in a supporting role in the 1942 film The Spoilers, starring John Wayne, and in Fritz Lang's Scarlet Street in 1945. While her work in the late 1940s would occasionally involve a supporting role in MGM films like Cass Timberlane with Spencer Tracy, her film career went into decline, with roles in films at Poverty Row studios like Monogram Pictures and PRC. She returned to the stage and co-starred with Franchot Tone in The Second Man.
She made her television debut in 1950 in The Importance of Being Earnest, which allowed her to once again display her finely-honed British accent. More television work followed. Lindsay appeared in only four films during the 1950s and two in the 1960s. Her final feature film was Tammy and the Doctor (1963).
Early in her career, Lindsay lived with her sister Helen in Hollywood. Later in life, she lived with her youngest sister, Mickie. She never married. According to biographer and historian William J. Mann, Lindsay was the life partner of musical theatre, film and television actress Mary McCarty (1923-1980), who predeceased Lindsay.
Lindsay died at the age of 70 of emphysema in 1981 at the Good Samaritan Hospital in Los Angeles, survived by her four sisters and one brother. She was buried at Holy Cross Cemetery, Culver City, California.
Lindsay's sister, Jane Kies (1909–1985), was also an actress under the stage name Jane Gilbert. Lindsay's niece, Peggy Kenline, and great-nephew, Brad Yates, were also actors.
In 1940, Jane Gilbert wed actor William Hopper, son of Hedda Hopper, best known for his role as Paul Drake in the Perry Mason television series. The couple had a daughter, Joan, in 1947.