Born in Pittsburgh, Pennsylvania, McShane spent his childhood in a conservative Catholic family in Kennewick, Washington, where he attended high school. He received his Bachelor of Arts degree, magna cum laude, in 1983 from Gonzaga University. Upon graduating, he joined the Jesuit Volunteer Corps, spending two years in Portland as a corrections counselor. He left the Jesuit Volunteer Corps to go to law school, enrolling at Northwestern School of Law of Lewis & Clark College, from which he received his Juris Doctor, cum laude, in 1988. He had worked for the Clark County District Attorney's office during law school but, on graduating, McShane joined the Office of the Metropolitan Public Defender in Portland, where he worked from 1988 to 1997.
He served as a full-time Judge Pro Tempore on the Multnomah County Circuit Court from 1997 to 2001 and as a Judge on the same court from 2001 to 2013. He handled civil, criminal and family court cases. He received the Oregon State Bar President's Public Service Award in 2012.
On September 19, 2012, President Obama nominated McShane to serve as a United States District Judge for the United States District Court for the District of Oregon, to the seat vacated by Judge Michael R. Hogan who took senior status on September 24, 2011. On January 2, 2013, his nomination was returned to the President, due to the sine die adjournment of the Senate. On January 3, 2013, he was renominated to the same office. His nomination was reported by the Senate Judiciary Committee on March 7, 2013, by voice vote. The Senate confirmed his nomination on May 20, 2013, by voice vote. He received his commission on May 30, 2013.
On May 19, 2014, Judge McShane struck down Oregon's same-sex marriage ban in Geiger v. Kitzhaber. He ordered that the state immediately issue licenses to same-sex couples. The State of Oregon did not appeal (Oregon Attorney General Ellen Rosenblum declined to defend the state's ban on same-sex marriage); same-sex marriage in Oregon was legalized as a result.
McShane is openly gay, and he is the first openly gay federal judge in Oregon. His partner is Gregory Ford, and they have a son.
McShane sits on the boards of The Wayne Morse Center for Law and Politics at the University of Oregon and the Jesuit Volunteer Corps Northwest. He previously sat on the board of St. Andrew Nativity School, an inner city middle school in Portland for disadvantaged youth. He taught criminal practice and trial advocacy at Lewis & Clark Law School and is a frequent lecturer at law schools and bar associations in Oregon.