Margrethe Blossom Dearie was born on April 28, 1924, in East Durham, in the Catskills of New York (a few reference works give 1926), to a father of Scots-Irish descent and a mother of Norwegian descent. She began piano at five and studied classical music at first, then turned toward jazz in her teens, absorbing records by Count Basie, Benny Goodman and Duke Ellington. After high school she moved to Manhattan, dropped her first name, and sang in vocal groups attached to bands: the Blue Flames with Woody Herman's orchestra and the Blue Reys with Alvino Rey's. She also played cocktail piano around the city, and in the late 1940s she was one of the regulars at Gil Evans's apartment on West 55th Street, a gathering place for the musicians around Gerry Mulligan and the Birth of the Cool sessions. On February 19, 1952, she sang the woman's part on King Pleasure's Prestige recording of "Moody's Mood for Love," a vocal version of a James Moody solo with words by Eddie Jefferson, and later that year she played piano behind Annie Ross on a Dee Gee EP with Milt Jackson, Percy Heath and Kenny Clarke.

Later in 1952 she moved to Paris, where she formed the vocal group Les Blue Stars, which included Michel Legrand's sister Christiane and the American singer Bob Dorough. In 1954 the group had a hit in France with a French-language "Lullaby of Birdland" arranged by Michel Legrand. That year she also married the Belgian flutist and saxophonist Bobby Jaspar; they divorced in 1957. She also recorded as a pianist for Barclay, first on the 1955 10-inch LP Miss Blossom Dearie et sa musique "Jazz-Sweet", an instrumental trio date on which she does not sing. Norman Granz heard her in Paris and signed her to Verve, and she returned to the United States in 1956.

Her six Verve albums, recorded between 1956 and 1960, put her piano and voice in small-group settings, usually with Ray Brown on bass and Herb Ellis, Kenny Burrell or Mundell Lowe on guitar. The self-titled debut was recorded on September 11 and 12, 1956, with Ellis, Brown and the drummer Jo Jones; Soubrette: Blossom Dearie Sings Broadway Hit Songs (1960) was her first date with a full orchestra, arranged by Russell Garcia. Dave Garroway, the host of the Today show, was an early champion and had her on the air several times. In 1962 she recorded a radio commercial for Hires Root Beer, and its popularity led to a promotional LP, Blossom Dearie Sings Rootin' Songs (1963). May I Come In? (Capitol, 1964) was recorded, atypically for her, with an orchestra arranged by Jack Marshall.

In 1966 she made her first appearance at Ronnie Scott's club in London, and a live set from that room became Blossom Time at Ronnie Scott's, her first live album. Between 1966 and 1970 she recorded several albums in Britain for Fontana, and she appeared regularly on British television, including Bernard Braden's show. At home she worked the New York supper-club circuit. In the early 1970s, dissatisfied with the way larger labels handled her records, she founded Daffodil Records; its first release was Blossom Dearie Sings (1973), produced by Bob Dorough, with a program of her own songs that includes a tribute to John Lennon, "Hey John." She was the label's only artist and ran it for the rest of her career, reportedly one of the first independent labels founded by a woman. Daffodil albums followed through 1999, including My New Celebrity Is You (1976), whose title song was one of Johnny Mercer's final compositions, and she wrote "I'm Shadowing You" with Mercer in 1975.

Dearie also sang on television and radio in other settings. She was one of the voices on Bob Dorough's Schoolhouse Rock! songs, including "Figure Eight," "Mother Necessity" and "Unpack Your Adjectives." "I'm Hip," by Dave Frishberg and Dorough, became her best-known song. In the 1970s she appeared at Carnegie Hall with Anita O'Day and Joe Williams, and in 1983 she received the first Mabel Mercer Foundation Award. She continued to work in clubs in Greenwich Village and elsewhere, with regular visits to London and tours as far as Australia, until about 2006, when failing health ended her performing. She passed away in her sleep of natural causes at her apartment in Greenwich Village on February 7, 2009, after a long illness. Her recordings have since turned up in films and television series including The Squid and the Whale, The Artist and The Marvelous Mrs. Maisel.

Dearie had a light, girlish voice that the New Yorker's Natalie Weiner once described as a childish treble delivering postgraduate lyrics, and the contrast was the point: she sang literate, quick-witted songs by Cole Porter, Rodgers and Hart, Comden and Green and her friends Dorough, Frishberg and Mercer with exact diction and a playful, understated swing. She said she thought of herself as a jazz musician learning to be a jazz singer, and she did not separate the two jobs: she learned each song at the piano first and added the words afterward, and she held that accompanists tend to play far too much behind a singer, a view her own spare backing reflects. Dave Frishberg recalled that when he asked Bill Evans about his use of fourths in chord voicings, Evans answered that he had learned it from hearing Dearie play, which suggests how seriously fellow pianists took her. She also wrote songs in tribute to Dusty Springfield and John Lennon. Critics tended to file her with the cabaret singers, and her audiences were famously expected to stay quiet; she would stop a song to ask a noisy room for silence. The blogger Marc Myers placed her among the singers of her era, with Peggy Lee, Sarah Vaughan, Carmen McRae and Ella Fitzgerald, by saying she stood out for fusing cabaret and jazz. Her influence runs through later piano-playing singers, and two of them have made whole albums of her repertoire: Nicki Parrott's Dear Blossom (2017) and Silvia Manco's Hip! The Blossom Dearie Songbook (2019).