Margaret Webster was born in New York City, the daughter of two famous actors, Ben Webster and Dame May Whitty. She was also called Peggy Webster. She graduated from Queen Anne's School, Caversham, England, in 1923. Then she attended Etlinger Dramatic School in London.
She spent the early part of her career in England, where she became well known in the theatre. She worked for several established theatrical companies, including from 1929 to1930 at the Old Vic.
She returned to the US in 1937 and began an impressive run directing the Shakespeare play, Richard II with Maurice Evans in the title role. They formed a partnership that lasted until 1942, with Webster directing Evans in Broadway productions of Hamlet , Twelfth Night and Henry IV, Part I. In 1941-42, she directed Evans and Judith Anderson in a Broadway production of Macbeth .
She never married. It was while she was directing Hamlet in 1938 that she began her long romantic relationship with actress Eva Le Gallienne. In 1939, she also staged abbreviated versions of four of Shakespeare's comedies for the Globe Theater at the New York World's Fair.
When Evans joined the army, Webster continued to have success directing classical plays on Broadway starring Le Gallienne, and her greatest triumph, Othello (1943), starring Paul Robeson in the title role and Jose Ferrer as Iago, which ran for 296 performances, by far the longest run of a Shakespearean production on Broadway, a record that has not been remotely approached since. Webster played Emilia in the production's initial year (she was replaced by Edith King in 1944).
In 1945, she staged the longest-running performance of Shakespeare's The Tempest ever to play Broadway. This production was only the second US staging of a Shakespeare play to feature an African-American actor in a prominent role among an otherwise all-white cast. The production played for 100 performances, then took a short break and returned to Broadway for 24 more performances.
In 1946, Webster and Le Gallienne co-founded the American Repertory Theater with producer Cheryl Crawford, with Webster's staging of Shakespeare's Henry VIII as its premiere production, starring Le Gallienne as Katherine, Walter Hampden as Cardinal Wolsey and Victor Jory in the title role. The theater operated until 1948.
In 1948, her personal affair with Le Gallienne ended and she went on tour with her company, the Margaret Webster Shakespeare Company. The tour lasted until 1951, but Webster left in 1950 to become the first woman to direct at the New York Metropolitan Opera. In 1964 she directed Leo Genn in 12 Angry Men in London. She also directed Macbeth at the New York City Opera.
In 1950, Webster directed a production of Verdi's Don Carlos at New York's Metropolitan Opera, becoming the first woman ever to direct for the Met.
It was such a success that she continued to direct opera throughout the 1950s, putting her creative stamp on productions of Aïda (1951) and Simon Boccanegra (1960), both at the Met, as well as Troilus and Cressida (1955), Macbetto (1957), The Taming of the Shrew and The Silent Woman (both 1958) for the New York City Opera.
Webster's career suffered a severe blow in 1951, when José Ferrer, under pressure, named her before the House Committee on Un-American Activities. Although she was eventually cleared of all charges labeling her a Communist sympathizer, she was blacklisted and had difficulty finding work in the United States.
She returned to England, directing at Stratford-upon-Avon and at the Old Vic. She regained her former status in the United States in 1961, when the State Department invited her to travel to South Africa as a member of its American Specialists Program.
Her later work during the 1960s included a series of visiting lecturer positions at various American universities where she taught, directed, and performed her one-woman shows on Shakespeare and George Bernard Shaw, until her death from cancer, aged 67. at St Christopher's Hospice, 51 Lawrie Park Road, Sydenham, England.