Methot was born in Portland, Oregon, the only child of Mr. and Mrs. Jack D. Methot. Methot's father was a ship captain and traveled frequently. She started performing on stage at the age of five. As a child, she was nicknamed, "The Portland Rosebud." At the age of 8, she was chosen to travel with selected Portland delegates to Washington, D.C. where she presented President Woodrow Wilson with a bouquet of flowers. Methot was educated at Miss Catlin's School and graduated in 1919. She performed with the Baker Stock Company in Portland until 1922 when she left for New York City. After her arrival, she met George M. Cohan and worked in All the King's Men, The Song and Dance Man, and The Medicine Man, as well as others, totaling some ten shows between 1923 and 1930.

She became a popular Actress on Broadway during the 1920s where she was admired for both her acting and singing ability. While on Broadway, she originated a role in the Vincent Youmans/Billy Rose musical Great Day (1929), introducing the standard "More Than You Know" and several others. She moved to Hollywood in the early 1930s and began an association with Warner Bros. Studios. She was usually cast as unsympathetic second leads and tough-talking "dames" of Warner's contemporary crime melodramas such as Jimmy the Gent and Marked Woman.

Methot was married three times and had no children. At the age of 19, she married Cosmopolitan Productions cameraman Jack Lamond. They divorced in 1927. In 1931, Methot married Percy T. Morgan, the co-owner of the Cock n' Bull restaurant on Hollywood's Sunset Boulevard. Methot divorced Morgan in February 1937, claiming that Morgan would not allow her to accept an acting role in New York City.

Methot's third marriage was to actor Humphrey Bogart, whom she had met in the late 1920s and reconnected with in early 1936. They were married on August 28, 1938 in Beverly Hills. Bogart had been married to actresses Helen Menken and Mary Philips before marrying Methot, and blamed his previous divorces on his wives' careers and their long separations. Two years after Methot and Bogart were married, Methot gave up acting. The two became a high-profile Hollywood couple, but it was not a smooth marriage. Both drank heavily, and Methot gained a reputation for her violent excesses when under the influence. They became known in the press as "The Battling Bogarts," with Methot widely known, due to her combativeness, as "Sluggy". Bogart later named his motor yacht Sluggy in her honor. During World War II, the Bogarts traveled Europe entertaining the troops. At one point in their travels during the war, the Bogarts met up with Director John Huston in Italy. During a night of heavy drinking, Methot insisted that everyone Listen to her perform a song. Though they told her no, she sang anyway. The performance was so bad and embarrassing that Huston and Bogart remembered it years later and based a scene in Key Largo on the incident. It is the scene in which the alcoholic girlfriend (played by Claire Trevor) of the mobster (played by Edward G. Robinson) sings Moanin' Low off key and while intoxicated. The performance won Trevor an Academy Award.

After her divorce from Bogart, Methot was unable to renew the career she had given up and became locked into a pattern of alcoholism and depression. In the late 1940s, she moved back to Oregon where her mother helped take care of her.

Numerous battles took place at the Hollywood residence of the famous couple - nicknamed Sluggy Hollow - including one in which Methot stabbed Bogart in the shoulder. The incident was kept out of the press by the publicity department of Warner Bros. Actress Gloria Stuart recalled, in her later years, a dinner party at which Methot produced a pistol and threatened to shoot Bogart. The couple separated and reconciled several times over the course of their marriage. While filming To Have and Have Not in 1943, Bogart fell in love with his 19-year old co-star Lauren Bacall and the two began an affair. Methot caught wind of the affair and visited the set often. Bogart attempted to save the marriage but Methot's alcoholism intensified as did their fighting. Bogart announced that he had moved out of the couple's home on October 19, 1944. On October 30, Bogart announced that he had reconciled with Methot and that he was "going home. [...] In other words, we'll return to our normal battles." The reconciliation proved to be short lived; Methot announced that Bogart had moved out of their home yet again on December 3, 1944. Methot filed for divorce on May 10, 1945, in Las Vegas. The divorce was granted one hour after she filed the decree. Bogart married Lauren Bacall on May 21, 1945.

On June 9, 1951, Methot died at Holladay Park Hospital in Portland. Her death was attributed to acute alcoholism. Methot's remains are interred at the Portland Memorial Mausoleum in Portland, Oregon.