Margaret Schönberger Mahler was born to a Jewish family in the small town of Sopron, in western Hungary. She attended Vaci Utcai Gimnazium in Budapest, a rare achievement for a girl of that era. In Budapest, she met the influential Hungarian psychoanalyst Sándor Ferenczi and began to read the works of Sigmund Freud. After a brief period studying art history, she entered medical school at the University of Budapest in 1917, before transferring to the University of Jena in Germany, where she graduated in 1922. She moved to Vienna, Austria and began training in psychoanalysis with Helene Deutsch in 1926. After seven years, she was certified as an analyst. In 1936, she married Paul Mahler, and the couple fled to England and then the USA to escape the Nazis. In New York, Dr. Mahler opened a private practice and worked with child health experts such as Benjamin Spock. Dr. Mahler loved working with children and became heavily involved in research on pediatric mental health. She was among the first to specialize in the treatment of psychotic children. She also taught child therapy and was a member of the New York Psychoanalytic Society and the Institute of Human Development. She taught at Columbia University between 1941 and 1955, and served as a clinical professor of psychiatry at the Albert Einstein College of Medicine in the Bronx until 1974.
Her published works included The Psychological Birth of the Human Infant: Symbiosis and Individuation (1975). She received several awards for her work, including Barnard College's highest honor, the Barnard Medal of Distinction, in 1980.