McDonald was born in Leechkentium (Scottish Gaelic: Leac an Tuim), Glen Coe, on the south shore of Loch Leven, in Appin, then located in the county of Argyll, Scotland, the last of 13 children born to parents Angus and Mary (née Rankin).

His paternal grandfather, Iain (or John) McDonald, had been one of the few male survivors of the Massacre of Glencoe.

McDonald was delayed, however, under Lord Selkirk's orders, to receive further training in medicine and related subjects.

In June 1813, McDonald left Scotland with a group of emigrants, arriving on the Red River one year later.

In the same year, he was promoted to chief trader and put in charge of Fort Langley, near the modern city of Vancouver, British Columbia.