Born in Cheshire, England to Thomas and Mary Catherine (née Parry) Nesbitt as Kathleen Mary Nesbitt in 1888 of Welsh and Irish descent, she was educated in Lisieux, France, and at the Queen's University of Belfast and the Sorbonne. Her younger brother, Thomas Nesbitt, Jr., acted in one film in 1925, before his death in South Africa in 1927 from an apparent heart attack.

She made her debut in London in the stage revival of Arthur Wing Pinero's The Cabinet Minister (1910). She acted in countless plays after that. In 1911, she joined the Irish Players, went to the United States and debuted on Broadway in The Well of the Saints. She also was in the cast of John Millington Synge's The Playboy of the Western World with the Irish Players when the whole cast was pelted with fruits and vegetables by the offended Irish American Catholic audience. She became the love of English poet Rupert Brooke in 1912. Brooke wrote love sonnets to her, and they were engaged to be married when he died during World War I.

Nesbitt became the love of English poet Rupert Brooke in 1912, who wrote love sonnets to her. They were engaged to be married, but he died in 1915 at age 27 of blood poisoning, the result of a bite from an infected mosquito while he served in the Royal Navy during World War I.

Nesbitt returned to the US and appeared on Broadway in Quinneys (1915) and John Galsworthy's Justice (1916) as John Barrymore's leading lady in his first dramatic stage role. After five other plays there, she returned to England. For the rest of the decade she performed in London; her roles included the title role in a revival of John Webster's The Duchess of Malfi. Her film debut was in the silent A Star Over Night (1919). She then performed in The Faithful Heart (1922). She did not appear in a film again until 1930, when she played the role of Anne Lymes in Canaries Sometimes Sing, which was an early talkie. In 1932, she appeared in The Frightened Lady. She appeared in the 1938 film version of Pygmalion as "a lady" who attends the Embassy ball. In the opening credits her first name was spelled as "Kathleen", but as "Cathleen" at the end of the film. She played the part of Mother in the 1949 BBC TV remake of the drama film Elizabeth of Ladymead.

In 1921 Nesbitt married World War I Military Cross-winner and barrister turned actor Cecil Ramage. They had two children. She and Ramage were separated for many years but remained legally married until her death in 1982.

Other Broadway appearances included Aunt Alicia in the original Anita Loos adaptation of Gigi (1951), Sabrina Fair (1953), and Anastasia (1954). In 1956, she played Mrs. Higgins in My Fair Lady starring Rex Harrison. Nesbitt reprised the role in 1981, in her 90s, in a Broadway revival, opposite Harrison, who was in his 70s.

Nesbitt's first Hollywood film was Three Coins in the Fountain (1954), in which she played the character role of La Principessa. This was followed that same year by Black Widow, in which she played Lucia Colletti. She was Cary Grant's Grandmother Janou in 1957's An Affair to Remember (though she was, in fact, only 16 years older than Grant) and, the following year, was part of the ensemble cast of Separate Tables. She also appeared in The Parent Trap (1961), and Promise Her Anything (1965).

She played Agatha Morley on the TV series The Farmer's Daughter from 1963 to 1966, playing the mother of a Congressman (played by william Windom). She guest starred on such shows as The United States Steel Hour; Wagon Train; Naked City, Dr. Kildare and Upstairs, Downstairs (as Rachel Gurney's mother, Mabel, Countess of Southwold).

In 1969 she played Richard Burton's mother in the film Staircase and again in Villain two years later. She had a small but memorable role as an elderly drug addict in French Connection II (1975) alongside Gene Hackman. Her next film was Hitchcock's Family Plot (1976), in which she played Julia Rainbird. She then appeared as the grandmother in Julia (1977). Her final film was Never Never Land (1980) as Edith Forbes.

She was the subject of This Is Your Life in 1980 when she was surprised by Eamonn Andrews.

Nesbitt lived for many years in the United States, but returned to the United Kingdom where she was appointed a Commander of the Order of the British Empire (CBE) in 1978. Her autobiography, A Little Love and Good Company, was published in 1973. After a career spanning over 80 years, one of the longest in show Business history, Nesbitt died of natural causes at age 93 in London on 2 August 1982.