McNally was born in Gravesend on 20 December 1937, the son of Group Captain Patrick McNally of the Royal Air Force and Mary Deane Outred. He grew up in County Monaghan, Ireland, and was educated at Stonyhurst College. He was a relative of racing driver Redmond Gallagher.
He began his working life as a motorsport journalist for Autosport magazine, while also participating in sports car racing throughout the 1960s. This dual involvement in reporting and competing gave him an early and comprehensive understanding of the sport's environment.
McNally relocated to Lausanne, Switzerland, where he worked for Philip Morris's Marlboro brand as a sponsorship consultant. His role at Marlboro placed him at the centre of Formula One's transformation into a commercially driven enterprise during the 1970s, a decade when tobacco money reshaped the economics of the sport.
Between 1977 and 1979 he served as driver manager to James Hunt, a close friend whom he looked after on behalf of Marlboro. Hunt had won the 1976 Formula One World Championship in one of the most dramatic title contests in the sport's history, and McNally's role kept him closely connected to the top tier of the sport during this period.
By 1983 McNally had begun working with Bernie Ecclestone, the commercial rights holder who was consolidating control over Formula One's revenue streams. In December 1983 McNally established Allsport Management SA, a Geneva-based company that provided corporate hospitality and managed trackside advertising at Formula One circuits worldwide.
Allsport and its related entity Allsopp Parker & Marsh, registered in Ireland, together held the trackside advertising rights at Formula One venues and operated the Formula One Paddock Club — the exclusive grand prix hospitality product that became a fixture at every race on the calendar. The Paddock Club gave corporate guests access to premium facilities in the pit lane area and became a significant revenue stream for the sport as well as a valued tool for teams and sponsors managing commercial relationships.
McNally ran Allsport Management for more than two decades. In March 2006 he sold the company to CVC Capital Partners, the private equity firm that had recently acquired a majority stake in the Formula One commercial rights. He remained as chief executive until 2011, when he announced his retirement.
McNally is widely regarded as a foundational figure in the commercialisation of Formula One. By securing trackside advertising rights and building the Paddock Club into a world-class hospitality product, he helped create the premium commercial infrastructure that made Formula One attractive to major global brands. His work complemented Ecclestone's television and race-promotion deal-making, together producing a sport that by the 2000s generated revenues far beyond anything previously achieved in motorsport.
In 1967 McNally married Anne Downing, daughter of wealthy racing driver Ken Downing; the couple had two sons, Sean and Rollo. He was romantically involved with Sarah Ferguson, formerly Duchess of York, between 1982 and 1985. He has owned chalets in the Swiss ski resort of Verbier since 1980. He is also the owner of Sevenhampton Place in Wiltshire, the former home of James Bond author Ian Fleming, and led a restoration project at the Georgian property Buckland House in Oxfordshire.