Her career commenced as a cabaret artiste in restaurants and supper clubs in San Francisco. In 1945 she appeared in her own radio program. While she was appearing in Annie Get Your Gun in London (1947 – 1950), she studied at the Royal Academy of Dramatic Art in 1948. As a fundraiser to help rebuild the RADA theatre, she appeared as Nell Gwynne in In Good King Charles's Golden Days at Drury Lane Theatre (Oct 1948). She appeared at the London Palladium in 1958 while doing a concert tour of Europe and in cabaret at The Talk of the Town in February 1963. Among her many stage roles, she appeared in Two on the Aisle (1951), Carnival In Flanders (1953); Destry Rides Again (1959); Sherry! (1967); and 42nd Street (1986). She also performed the lead role in Annie Get Your Gun in its first London production (1947). Gray won the Tony Award for Best Lead Actress in a Musical for her role in Carnival in Flanders, even though this Broadway musical, with a script by Preston Sturges, ran for only six performances. She therefore holds a record that is unlikely to be broken: briefest run in a performance which still earned a Tony. She is the first person to have sung the English version of the French song C'est si bon in a movie : Holiday in Paris: Paris directed by John Nasht.

She was born as Sylvia Dolores Finkelstein (but known by Sylvia Dolores Vernon growing up) to Barbara Marguerite Gray (born Marguerite Gray) and Harry Vernon Finkelstein (stage name Harry Vernon) in Los Angeles, California, although obituaries listed Gray's birthplace as Chicago, as does her biography on the Internet Movie Database. Both her mother and father were Vaudeville actors, which is how they met. Gray's parents divorced when she was a young child. Dolores had an older brother, Richard Gray (born Richard Vernon), who also had a career in Hollywood. While attending Polytechnic High School she was in the Girls' Glee Club. She was 'discovered' by Rudy Vallee, who gave her a guest spot on his nationwide radio show. Dolores Gray was briefly signed with MGM, appearing in Kismet (1955) and It's Always Fair Weather (1955).

Apart from the many Soundtrack albums she appeared on, Gray recorded one album of songs in 1957 for Capitol Records with the title "Warm Brandy" (T897).

On September 24, 1966, Dolores Gray married Andrew J. Crevolin, a California businessman and Thoroughbred racehorse owner who won the 1954 Kentucky Derby. Despite erroneous reports in the media that they divorced, they remained married until his death in 1992. The union was childless.

She was best known for her theatre roles. She recalled once, "What a gift that would be to have more of a permanent record. A stage performance is just that, then it's lost. When I see movies on TV, I think, 'How great to have that.' But why look back? The decisions I made, I made. I can't change that." In 1973 she took over from Angela Lansbury in the London production of Gypsy at the Piccadilly Theatre. In 1987 she starred in the London production of Stephen Sondheim's 'Follies' at the Shaftesbury Theatre to great acclaim and appeared in The Royal Variety Performance of that year with a show stopping performance of the song 'I'm Still Here' from the show. In 1978 she also appeared on BBC TV's long running variety show 'The Good Old Days'- Chairman Leonard Sachs had also appeared in 'Follies' as theatre owner Dimitri Wiseman, introducing Miss Gray, one of ' The Wiseman Girls'. Theatre critic Michael Phillips wrote Gray's voice sounded like "a freight-train slathered in honey".