She was married three times, to actor and Director Edward Buzzell in 1926, to Stewart McDonald in 1941, and designer Eugene Berman in 1949. These have been termed lavender marriages, in that they were intended to conceal her bisexuality and her affairs with women, including filmmaker Dorothy Arzner and Playwright Mercedes de Acosta. Munson has been listed as a member of a group called the "sewing circle", a clique of lesbians organized by Actress Alla Nazimova.

Her first starring role was in a Warner Brothers talkie called Going Wild (1930). Originally, this film was intended as a musical, but all the numbers were removed prior to release owing to the public's distaste for musicals, which had virtually saturated the cinema in 1929-30. Munson appeared the next year in The Hot Heiress, in which she sings several songs along with her co-star Ben Lyon. She also starred in Broadminded (1931) and Five Star Final (1931). She briefly retired from the screen, only to return in 1938.

In 1955, plagued by ill health, she committed suicide at the age of 51 with an overdose of barbiturates in her apartment in New York. A note found next to her deathbed read, "This is the only way I know to be free again...Please don't follow me." She is buried at Ferncliff Cemetery, Hartsdale, NY. Munson posthumously received a star on the Hollywood Walk of Fame, located on the north side of the 6200 block of Hollywood Boulevard.

Munson’s career was stalemated by the acclaim of Gone with the Wind; for the remainder of her career, she was typecast in similar roles. Two years later, she played a huge role as another madam, albeit a Chinese one, in Josef von Sternberg's film noir The Shanghai Gesture. Her last film was The Red House, released in 1947.