Her second novel, A Northern Light, is Donnelly's biggest success to date. It is based on the infamous murder of Grace Brown by Chester Gillette in the Adirondack Mountains in 1906 - which had been the basis for Theodore Dreiser's epic An American Tragedy and its adaptation, the 1951 film A Place in the Sun.

Donnelly returned to New York at age 25, moving to Brooklyn. Her first book was published by Atheneum in 2002: Humble Pie, a picture book with the veteran Illustrator Stephen Gammell. That year she also published her first novel, the product of ten years work. The Tea Rose (Thomas Dunne, 2002) is the first book of a trilogy set in the East End of London late in the 19th century, with ties to the story of Jack the Ripper. The second book, The Winter Rose, continues the tale, following the Finnegan family and related characters from London to Africa to the coast of Northern California. The third novel in the series, The Wild Rose, which explores Willa and Seamie's story, follows the characters from London on the verge of World War I to Arabia in 1918.

A Northern Light was published as A Gathering Light in the U.K. There, it won the 2003 Carnegie Medal, recognizing the year's outstanding children's book. For the 70th anniversary of the Medal a few years later, it was named one of the top ten winning works, selected by a panel to compose the ballot for a public election of the all-time favorite. Similarly, it was named one of Time Magazine's 100 Best Young Adult Books of All Time in 2015.

In 2004, A Northern Light won the Carnegie Medal for children's and young-adult books published in Britain - where it was entitled A Gathering Light and may have been her first work published in the U.K. In the U.S., it won the Los Angeles Times Book Prize for young-adult literature and was a runner-up for the Printz Award from the American Library Association (ALA), recognizing the year's best book for young adults. In 2015, Time Magazine named A Northern Light one of the best YA books of all time.

Her second young-adult novel, Revolution, is a tale of two teenage girls - one in present-day Brooklyn, and one in Paris during the French Revolution - whose stories interweave as they struggle to make sense of the tragedies they encounter. The book was published in October, 2010 by Delacorte Press, an imprint of Random House, with a first run of 250,000 copies. The book was nominated for a Carnegie Medal, and landed on a number of "best-of" lists, including Kirkus Reviews, School Library Journal, Amazon.com, BN.com, ALA-YALSA, among others. The audiobook edition from Listening Library, read by Emily Janice Card and Emma Bering, was a runner-up for the ALA's annual Odyssey Award. Donnelly was "captivated and amazed" by the rendition of what she calls "the hardest book I've written".

In 2011, Donnelly, unhappy with the lack of a books category on Fox-TV's Teen Choice Awards, started Just Add Books on Facebook, in which she appealed to readers to write to Rupert Murdoch and request that a books category be added to the show. In 2012, the Teen Choice Awards added a books category. Fox has never acknowledged Donnelly or Just Add Books.

As of July 2012, the U.S. Library of Congress catalogs six books by Donnelly, one 32-page picture book and five novels that surpass 2500 pages in sum.

From 2014-2016, Disney published Donnelly's four-book Waterfire Saga (Deep Blue, Rogue Wave, Dark Tide and Sea Spell), which have won numerous awards including the Nature Generation's 2015 Green Earth Book Award. The song "Open Your Eyes", released by Hollywood Records and sung by Bea Miller, was drawn from the chant sung by the river witches in Deep Blue.

In September 2017, Donnelly announced a major new project with Scholastic Publishing called Stepsister, to be published in 2019. The story begins where the classic tale of Cinderella leaves off and follows her wicked stepsister Isabelle as "personifications of fate and chance battle for control of her life, hinting that there may be hope after all for a girl labeled ugly since her first appearances in literature". Film rights for Stepsister are being handled by william Morris Endeavor and a deal is said to be in the works.

Donnelly returns to historical fiction with Fatal Throne, a book about Henry VIII and his six wives to be published by Random House/Schwartz & Wade in May 2018. For this project, Donnelly joins six other authors (Candace Fleming, M.T. Anderson, Stephanie Hemphill, Deborah Hopkinson, Linda Sue Park, and Lisa Ann Sandell), each of whom will write the part of Henry or one of his wives. Donnelly is writing Anne of Cleves, Henry's fourth wife.