Iain Macleod was born at Clifford House, Skipton, Yorkshire on 11 November 1913.

His parents were from the Isle of Lewis in the Western Isles of Scotland. They moved to Skipton in 1907. Macleod grew up with strong personal and cultural ties to Scotland, as his parents had a holiday home on the Isle of Lewis. Macleod's father was a well-respected general practitioner in Skipton, with a substantial poor-law practice.

He was educated at Fettes College in Edinburgh. Macleod showed no great academic talent but did develop an enduring love of literature, especially poetry, which he read and memorized in great quantity and his results were good enough for him in 1932 to go to Gonville and Caius College, Cambridge, where he obtained a Lower Second in History three years later, in 1935.

He was one of the great British bridge players; he won the Gold Cup in 1937 and authored a book, Bridge is an Easy Game which contains a description of the Acol bidding system. A bridge connection earned him a job offer with a printing company, but by the late 1930s he was living the life of a playboy off his bridge earnings; he only gave up playing seriously (and relying on his bridge earnings) in the early 1950s when his developing political career became his priority.

Macleod joined the Royal Fusiliers as a private in 1939 but was commissioned into the Duke of Wellington's Regiment and fought briefly in France in 1940, suffering a serious war wound to the thigh which, particularly when combined with a later spinal condition (ankylosing spondylitis), was to leave him with pain and a limp for the rest of his life. Following his recovery from injury (and attendance at staff college), he landed in France on D-Day as Deputy Assistant Quartermaster-General (DAQMG) of the 50th (Northumbrian) Division and continued to serve in France until November 1944 when he returned to Yorkshire. He ended the war as a Major.

He unsuccessfully contested the Western Isles constituency at the 1945 general election (there was no Conservative Party in the seat, so his father appointed himself Association Chairman). Macleod came bottom of the poll, obtaining 2756 votes out of 13,000.

In 1946, he joined the Conservative Parliamentary Secretariat, subsequently merged into the Conservative Research Department. Here he became close friends with Enoch Powell, but the two fell out over Powell's 1968 Rivers of Blood speech, and Macleod refused to speak to Powell again after the speech. Powell later recalled that Macleod's dealings with him were as if Powell was a pariah afterwards.

At the General Election of February 1950 he won in the parliamentary constituency of Enfield, West. Though not initially appointed to ministerial office, a brilliant Commons performance in March 1952 against Aneurin Bevan in a debate on health caught Churchill's attention, and six weeks later, on 7 May, Macleod was appointed Minister of Health. In this position, later in 1952, he famously made the announcement that British clinician Richard Doll had proved the link between smoking and lung cancer at a press conference throughout which he chain-smoked.

In the Eden and Macmillan governments he served first as Minister of Labor and National Service (1957-9) and then as Secretary of State for the Colonies (1959-61). Here he presided over considerable decolonization, seeing Nigeria, British Somaliland, Tanganyika, Sierra Leone, Kuwait and British Cameroon become independent, and in Kenya ending the state of emergency and freeing Kenyatta. He made a tour of Sub-Saharan Africa in 1960. His work in promoting decolonization, though it enjoyed Macmillan's personal support, was resisted by the Conservative Right; his role in negotiations over the future of Rhodesia attracted the damaging and much-remembered description of Macleod by the party grandee, the Marquess of Salisbury, as "too clever by half".

Not helping his acceptance by the more right-wing elements of his own party at the time, Macleod was against the death penalty and supported legalization of abortion and homosexuality. Indicative of his centrist leanings, Macleod established good personal relations with several of his Labor opposite numbers, including both Aneurin Bevan and James Callaghan, even though he clashed with Callaghan numerous times at the dispatch box while serving as Shadow Chancellor in the 1960s (by contrast, he did not get on with Callaghan's successor, Roy Jenkins, after the November 1967 government reshuffle, considering him vain and arrogant).

In 1961 he became Chancellor of the Duchy of Lancaster, leader of the House of Commons, and chairman of the Conservative Party organization. When Harold Macmillan resigned as Prime Minister in 1963, Macleod, despite his ability, was not considered a serious prospect for the leadership. Having lent his support to Rab Butler, and strongly opposed the successful candidacy of the Earl of Home (later Sir Alec Douglas-Home), Macleod (along with Enoch Powell) refused to serve under the latter as Prime Minister (though he did return to the shadow cabinet under Home after the 1964 election). Macleod did not contest the first ever party leadership election in 1965, but backed Edward Heath.

The coinage of the word stagflation is attributed to him. Speaking in the House of Commons on November 17, 1965, he said: "We now have the worst of both worlds — not just inflation on the one side or stagnation on the other, but both of them together. We have a sort of 'stagflation' situation. And history, in modern terms, is indeed being made."

While out of office in the mid-1960s he served as editor of The Spectator, where he caused further controversy by publishing in early 1964 a candid account of the 1963 party leadership contest.

As Shadow Chancellor in 1967 Iain Macleod helped to found the homeless charity Crisis.

On 20 June 1970, two days after the Conservative Party's election victory, Macleod was appointed Chancellor of the Exchequer by Prime Minister Edward Heath. However, on 7 July 1970 he was rushed to hospital with appendicitis. He was discharged 11 days later but at 10.30pm on 20 July 1970, while in 11 Downing Street, Iain Macleod suffered a severe heart attack and died at 11.35pm. There seems little doubt that the long years of illness and pain had shortened his life. Cecil King (in "The Cecil King Diary 1970-1974") states that according to mutual friends, he was killed by terminal cancer which by the time of his death was affecting his spine. However, Macleod's own doctor, a Dr Forster, said there was no evidence that he was suffering from cancer at the time of his death.

Iain Macleod left behind him an outline budget which some observers found surprisingly hard-line in its proposals for control of public spending. This included the infamous abolition of free school milk, which became the first significant Ministerial act of the new Education Secretary and future Prime Minister, Margaret Thatcher—she would come to be known as "Margaret Thatcher, the Milk Snatcher", as a result.

He also bequeathed his successors a detailed plan for tax reform, much of which was put into action.

Many Conservative politicians of generations following Macleod recalled him as a highly effective speaker. He said of the Labour Party under Gaitskell that, when offered their choice of weapons, they invariably chose boomerangs. He was reputed to be the only speaker that Harold Wilson was afraid of - he compared Wilson to a kipper, which has two faces. John Major specifically cited his example on taking office.