Born at the Hofburg Palace in Vienna she was the ninth child of Emperor Leopold I and Eleonor Magdalene of the Palatinate-Neuburg.

Shortly before the War of the Spanish Succession, there was the question of the new king of Spain, Philip V of Spain, marrying the archduchess, but Louis XIV of France was opposed to this match for political reasons, and the official reason given was that none of the archduchesses offered pleased his grandson.

In 1708, her older sister Archduchess Maria Anna married John V of Portugal; plans for a second union between Austria and Portugal were discussed when Maria Magdalena was proposed as a bride for Infante Francis, Duke of Beja, brother of John V. Negotiations failed in the early stages and, as such, both candidates died unmarried.

Again after the war the question of her becoming queen of Spain to replace the now deceased Luisa Maria of Savoy was floated.

After the failed marriage, she lived a life of seclusion and remained unmarried and died without issue.