O'Day was born Anita Belle Colton in Chicago, Illinois. O'Day got her start as a singer in her teens. According to Anita, she chose the stage name O'Day for herself (after being arrested for truancy), because it was Pig Latin for dough, and thought it might bring her luck.

In the late 1930s, she began her career in the 'Off-Beat', a popular hangout for musicians. Meeting Gene Krupa there lead to her joining Krupa's band in 1941. Roy Eldridge also worked with the band, and O'Day's and Eldridge's duet "Let Me Off Uptown" became a hit. That year, Down Beat named O'Day "New Star of the Year" and in 1942 readers voted her into the top five big band singers.

Leaving Krupa, O'Day joined Woody Herman's band. After only a year with Herman she returned to Krupa, but soon joined Stan Kenton's band, cutting an album that featured "And Her Tears Flowed Like Wine", another hit for O'Day.

Starting her solo career in the late 1940s, her album This is Anita, which she recorded for the newly established Verve Records (it was the label's first LP), further boosted her popularity, and she recorded some twenty albums for Verve throughout the 1960s. As a live performer O'Day also began performing in festivals and concerts with such musicians as Louis Armstrong, Oscar Peterson, Dinah Washington, George Shearing, Raymond Scott, Cal Tjader, and Thelonious Monk. She appeared in the documentary Jazz on a Summer's Day, filmed at the 1958 Newport Jazz Festival which increased her popularity.

During this time, O'Day continued to tour and record whilst addicted to heroin. 1969 almost saw her death from an overdose. Her career entered a period of hiatus whilst she overcame her alcohol and drug addictions, and she made a comeback at the 1970 Berlin Jazz Festival and resumed making live and studio albums, many recorded in Japan, several released on her own label, Emily Records.

Her 1981 memoir, High Times, Hard Times saw her speak candidly about her drug addiction.

2006 saw her first album release in 13 years, entitled Indestructible!.