O'Donoghue's early career included work as a Playwright and stage actor at the University of Rochester where he drifted in and out of school beginning in 1959. His first published writing appeared in the school's humor magazine Ugh!

After a brief time working as a Writer in San Francisco, California, O'Donoghue returned to Rochester and participated in regional theater. During this period, he formed a group called Bread and Circuses specifically to perform his early plays which were of an experimental nature and often quite disturbing to the local audience. Among these are an absurdist work exploring themes of Sadism entitled "The Twilight Maelstrom of Cookie Lavagetto", a cycle of one-act plays called Le Theatre de Malaise and the 1964 dark satire The Death of JFK.

In 1968, O'Donoghue worked with Illustrator and fellow Evergreen Review veteran Phil Wende to create the illustrated book The Incredible, Thrilling Adventures of the Rock. Biographer Dennis Perrin described it as having "no plot. The same rock sits in the same spot in the same forest for thousands of years. Nothing much happens. Then, while two boys roam the wood in search of a Christmas tree, one sees the rock and is inspired."

In 1969, O'Donoghue and Trow co-wrote the script for the James Ivory / Ismail Merchant film Savages. This film tells the story of a tribe of prehistoric "Mud People" who happen upon a deserted Gatsby-esque 1930s manor house. The Mud People evolve into contemporary high-society types who enjoy a decadent weekend party at the manor before ultimately devolving back into Mud People. Savages was eventually released in 1972.

O'Donoghue shared SNL Emmy Awards for outstanding writing in 1976 and 1977. After giving an interview to Michael McKenzie for Scholastic Magazine, O'Donoghue helped clear McKenzie to write the first documentary on the show, titled "Backstage At Saturday Night Live!! [Scholastic] which came out the following year. He left the series in the fall of 1978, after three years.

In 1979, he produced a television special for NBC, featuring most of the SNL cast, called Mr. Mike's Mondo Video. Because of its raunchy content, the network rejected the program, which was then released as a theatrical film.

O'Donoghue returned to SNL in 1981 when new executive Producer Dick Ebersol needed an old hand to help revive the faltering series. O'Donoghue's volatile personality and mood swings made this difficult: His first day on the show he screamed at all the cast members, forcing everyone to write on the walls with magic markers. This horrified Catherine O'Hara so much that she quit before ever appearing on air. The only one he liked was Eddie Murphy, reportedly because Murphy wasn't afraid of him. According to the book Live From New York O'Donoghue tried to shake things up on that first day by saying "this is what the show lacks" and spray-painting the word "DANGER" on the wall of his office.

O'Donoghue also found some success as a country music Songwriter, his most notable credit being Dolly Parton's "Single Women" (1982). The song, originally composed for a 1981 SNL skit, later inspired the 1984 ABC TV movie Single Bars, Single Women starring Tony Danza and Jean Smart, which was produced by O'Donoghue.

O'Donoghue acted in a supporting role in the 1985 comedy Head Office. He had small parts in the 1979 movie Manhattan (which poked fun at SNL), the 1987 movie Wall Street, and the 1988 movie he co-wrote, Scrooged. O'Donoghue said he loathed the theatrical release of Scrooged, insisting until his death that he and co-writer and best friend Mitch Glazer had written a much better film. He also wrote or co-wrote a number of unproduced screenplays of which Saturday Matinee (aka Planet of the Cheap Special Effects) remains legendary in Hollywood Screenwriter circles.

On October 26, 1986, O'Donoghue was further connected to SNL by virtue of his marriage to the show's musical Director, Cheryl Hardwick, in the late 1980s. The union was fodder for a "Weekend Update" joke in which Dennis Miller noted that the couple was registered at Black and Decker.

In 1992, O'Donoghue created a Sketch show pilot called TV for the Fox network. It featured Kelly Lynch and it was directed by Walter Williams, the creator of Mr. Bill, but like a lot of O'Donoghue's work, it was too out there for primetime TV.

O'Donoghue suffered a long history of chronic migraine headaches during his career. On November 8, 1994, O'Donoghue died of a cerebral hemorrhage at age 54.

O'Donoghue's biography, Mr. Mike: The Life and Work of Michael O'Donoghue, was published in 1998 by Avon Books. The Barnes and Noble overview read, "This is the unvarnished story of a towering figure in American popular culture, the prime artistic force behind an entire generation of humorists and satirists."

On the pioneering, late-night Sketch comedy program Saturday Night Live, on which creator and executive Producer Lorne Michaels assigned him the position of head Writer, O'Donoghue appeared in the first show's opening Sketch, as an English-language Teacher instructing John Belushi to repeat what he does, teaching him such phrases as "I would like to feed your fingertips to the wolverines," and "We are out of badgers. Would you accept a wolverine in its place?" before dropping dead of a heart attack. He later appeared in the persona of a Vegas-style "impressionist" who would pay great praise to showbiz mainstays such as talk show host Mike Douglas and Singers Tony Orlando and Dawn—and then speculate how they'd react if steel needles were plunged into their eyes. The shrieking fits that followed are believed by biographer Dennis Perrin to be inspired by O'Donoghue's real-life agonies from chronic migraine headaches.