Sarah Margaret "Peggy" Moore Hodges was born in Indianapolis, Indiana, on July 26, 1911. She was the daughter of Arthur Carlisle Moore, a businessman, and Anna Marie Moore. Hodges developed her literary talents from an early age. She wrote for school magazines, first at Tudor Hall School for Girls and then later at Vassar College, where she studied English and theater, graduating with a Bachelor of Arts degree in 1932. On September 10, 1932, she married Fletcher Hodges, Jr., and together, they had three children.

In 1937, the young family moved to Pittsburgh when Fletcher Hodges became curator of the Stephen Foster Memorial at the University of Pittsburgh. Margaret Hodges dedicated her early years in the city to raising her young children. As they grew older, she began volunteering at the Carnegie Library of Pittsburgh, where her career in literature and libraries blossomed. She began writing professionally in the late 1940s as a member of the Junior league of Pittsburgh, publishing a column in the monthly Junior League Lights magazine and adapting children’s books into scripts for a Junior League radio program, The Children's Bookshelf. In 1953, Hodges became a radio storyteller for Let's Tell a Story, a program sponsored by Carnegie Library of Pittsburgh and the Pittsburgh Public Schools. In 1964, Let’s Tell a Story was adapted for television as Tell Me A Story, a nationally broadcast program through WQED-TV. Hodges appeared on air until the end of the show’s run in 1976. During her time at WQED, Hodges worked with Fred Rogers, with whom she developed a decades-long friendship. Her work in broadcasting earned her the nickname “the Story Lady.”

Hodges received the Carnegie Library staff scholarship in 1956, which allowed her to pursue a master's degree in library science at the Carnegie Institute of Technology (now Carnegie Mellon University). There, she also worked as a children's librarian and storyteller in Carnegie’s Library School. She studied under storyteller and educator Elizabeth Nesbitt, whose influence on her was profound. Hodges graduated in 1958, and in the same year, she published her first book, One Little Drum (1958).

As her literary career unfolded, Hodges continued her work as an educator. In 1964, she became a story specialist for the Head Start program of the Pittsburgh Public Schools, a position she held for four years. During this time, she also began teaching a course in storytelling at the University of Pittsburgh Graduate School of Library and Information Science. She went on to develop and teach courses in children’s literature, early childhood education, and folklore. In her time at the University of Pittsburgh, she was the driving force behind the establishment of the Elizabeth Nesbitt Room and the Elizabeth Nesbit Children’s Book Collection, in honor of her mentor at Carnegie Library School. Hodges retired from the university in 1978. In her obituary in the Pittsburgh Post-Gazette, her University of Pittsburgh colleague Elizabeth Mahoney summarized Hodges' influence on the field: "She gave so many children's librarians the tools to carry on the work."

Hodges had a celebrated career in children's literature for nearly half a century. Her works include children's fiction and nonfiction, as well as mythology and folklore. She wrote real-life stories based on the escapades of her three sons and retold folktales and myths in a picture book format. She also wrote biographies on significant figures in world history she felt were underappreciated by society. Her most beloved books included Saint George and the Dragon: A Golden Legend (1984), The Arrow and the Lamp: The Story of Psyche (1989), Saint Jerome and the Lion (1991), and The Hero of Bremen (1993).

Many of her books received awards and recognition. In 1964, The Wave (1964) was among the New York Times Ten Best Picture Books of the Year, and in 1965 it was nominated for a Randolph Caldecott Medal from the American Library Association. Lady Queen Anne: A Biography of Queen Anne of England (1968) in 1970 received the Indiana Author’s Day Award for Best Book for Young Adults by an Indiana Author. The following year, The Making of Joshua Cobb (1971) was selected as one of the New York Times’ Outstanding Books of the Year in the Ages 9-12 Fiction division. In 1985, Saint George and the Dragon: A Golden Legend received the Caldecott Medal, the Pennsylvania Library Association’s Carolyn W. Field Award for best children's book by a Pennsylvania author, the New York Times Best Illustrated Children's Book Award, and the Keystone State Literacy Association’s Keystone to Reading Book Award.

Numerous organizations also acknowledged Hodges both for her literary works and professional efforts to expand the availability, appeal, and variety of children's literature. She was recognized as a Distinguished Alumna of the Carnegie Library School and Graduate School of Library and Information Science in 1976; that same year, the University of Pittsburgh recognized her as a Distinguished Alumna. In 1977, the Pennsylvania School Librarians Association honored her with the Outstanding Pennsylvania Children's Author Award. For her literary achievements, the University of Pittsburgh School of Library and Information Sciences established the Margaret Hodges Scholarship in 1989.

Margaret Moore Hodges died in Verona, Pennsylvania, on December 13, 2005. Her final book, Moses, based on the Biblical figure, was published posthumously in January 2006.