Upon graduating from Notre Dame, she undertook studies at the University of Dayton, also in Ohio. While there she became involved in student politics, and was involved in founding the National Association of Students at Catholic Colleges and Universities, serving as president of the group in 1990 and 1991. She graduated with a Bachelor of Arts in political science in 1991, was a registered Democrat and worked as an intern for the Lieutenant Governor of Ohio, Paul Leonard. In 1995 she graduated with a Master of Arts in religious studies. She later studied at Marquette University in Milwaukee, Wisconsin. After graduating from the University of Dayton she worked for a year as a volunteer teacher in New Mexico.

Keneally met her future husband, an Australian Labor Party politician, Ben Keneally, at World Youth Day 1991 in Poland. She moved to Australia in 1994 to be with him, but they returned to the US so Ben could take up a position with the Boston Consulting Group. They married there in 1996. They returned to Australia two years after their elder son was born. She became a naturalised Australian in 2000, the same year she joined the Labor Party. She renounced U.S. citizenship in 2002, prior to standing for election.

Keneally was elected to the New South Wales Legislative Assembly in 2003, following a bitter pre-election battle with Deirdre Grusovin, the sister of senior Labor politician Laurie Brereton. It was in fact her husband Ben who was more interested in a political career, relying on his friendship with Joe Tripodi. However, the party’s affirmative action rules required a female candidate, so Keneally ran instead. Before the election, Labor insiders were concerned that her strong American English accent would not play well with voters. Although she reportedly took elocution lessons to sound more Australian, to this day she speaks with a marked American accent.

As NSW Planning Minister from August 2008, Keneally’s department oversaw the local traffic diversions, and strict environmental management during construction, around the desalination pipeline works between Erskineville and Kurnell, approved by the department under the desalination pipeline project approval, granted by Frank Sartor, in November 2007.

For most of her life, she has identified as a staunch feminist. In 2009, she told The Daily Telegraph that when she heard her diocese’s bishop was on a local talk show, she called to ask him why girls could not be altar servers. The bishop’s “unsatisfactory answer,” she said, awakened her to “how women are disadvantaged in the church and society.”

In August 2009, Keneally was alleged to be one of the names being put forward in a challenge to wrest the leadership from NSW Premier Nathan Rees. Keneally responded to the accusations by stating: “He (Nathan Rees) has my support (as Premier)” and it was reported that she insisted she would never be Premier of New South Wales, something that was continuously disputed in the media.

In November 2009 Keneally again denied she wanted to be Premier, saying “I have always supported the Premier, Bob Carr, Morris Iemma and now Nathan Rees. Now is the time to put this ridiculous leadership speculation behind us.”

On 4 December 2009 Keneally was sworn in as the 42nd (and first female) premier of New South Wales by the State Governor, Marie Bashir. For the first time in Australian history, both the Premier and Deputy Premier of a state were women.

On 14 December 2010 her government sold the first tranche of the partial privatisation of the state’s electricity assets for $5.3 billion. Eight of the directors quit in protest over the sale of trading rights to the output of generators. After criticism of the privatisation, her Government abandoned the second stage of its electricity privatisation plan, as no companies bid.

On 22 December 2010 NSW Governor Marie Bashir prorogued Parliament on Keneally’s request. This act normally takes place later than December prior to elections. There were accusations that Keneally tried to halt the electricity inquiry, which later proceeded.

When she became Premier, she was highly popular and was the most popular political leader at one stage, as the Galaxy poll showed in March 2010, her personal satisfaction was 53 per cent. However, her own personal popularity did not transfer to her party, which had been well behind the Coalition in opinion polling since 2008.

Her popularity began to decline in August 2010, with her approval rating falling to 39 per cent. In October 2010, Newspoll reported that the Keneally government only had 23 per cent of the primary vote—the worst showing on record for a Labor government at the state level in Australia. The only lower result Newspoll had recorded at the time was in 1989, when the Queensland Nationals polled at 22 percent. This was a dramatic turnabout from the 2007 election; Labor would have been decimated had this figure been repeated at an election.

In May 2010, junior minister Karyn Paluzzano was forced out of politics for using public money for her 2007 reelection campaign and lying about it. Keneally moved to have Paluzzano suspended from the Labor Party, and Paluzzano resigned soon afterward. It was not enough to prevent Paluzzano’s once-safe seat of Penrith from being resoundingly lost to the Liberals at the ensuing by-election. Labor suffered a swing of over 26 percent—the largest swing against a sitting government in New South Wales history.

In October 2011, the inquiry which the O’Farrell government set up reported to the NSW Liberal/National Government that the partial sale was “reasonable and appropriate”.

With Labor’s defeat beyond doubt, Keneally resigned as premier and state Labor leader on election night and announced she would return to the backbench. Accepting responsibility for the worst defeat of a sitting government in NSW’s history, Keneally said, “The truth is the people of NSW, who entrusted us with government for 16 years, did not leave us. We left them.” On 11 June 2011, Keneally was granted by the Governor retention of the title “The Honourable”. On 23 June 2012, Keneally announced her resignation from the New South Wales Parliament.

After the defeat of the Labor government, a series of investigations at the Independent Commission Against Corruption, found that Keneally ministers Obeid, Tripodi, and McDonald had acted in a corrupt manner. Counsel assisting the inquiry, Geoffrey Watson SC, said in 2012 of investigations into the actions taken by the men in 2010 that these inquiries were the most important investigation ever undertaken by the ICAC and that there was corruption on a scale probably unexceeded since the days of the Rum Corps.

Keneally resigned from Parliament on 29 June 2012, to commence work as the Chief Executive of Basketball Australia. She was previously the Chair of the Basketball Australia board. Keneally left Basketball Australia in April 2014 to spend more time with her family. Keneally is also a director of Souths Cares, the nominated charity of the South Sydney Rabbitohs.

Keneally appeared as a witness at the ICAC in March 2014 concerning investigations of her former colleagues. She said that she had had concerns about Obeid, Tripodi and Tony Kelly’s lobbying and that their efforts had not influenced her. Asked if Obeid had “put her in her job” as premier, Keneally replied: “No, caucus did”.

In July 2014, Keneally joined Sky News Australia and began co-hosting panel program The Contrarians every Friday afternoon with Ross Cameron, before the pair were given their own self-titled program Keneally and Cameron. This program was axed in April 2015. Keneally joined Peter van Onselen as co-host of Sky News daytime program To The Point on 1 June 2015 which airs during PVO NewsDay. Keneally was also a regular presenter of primetime programs The Cabinet and Credlin & Keneally. Upon announcing her intention to stand for Federal parliament, she took leave from Sky News on the same day as her announcement on 14 November 2017.

Keneally and her family previously lived in Pagewood, within the electorate of Heffron which she represented in state parliament. In 2016, Keneally and her husband sold their home and moved across Sydney to a rented home in the affluent suburb of Hunters Hill. Together they own a $1.8 million holiday home on the isolated Scotland Island on the Northern Beaches of Sydney and a townhouse in Wollstonecraft purchased for $1.3 million in 2016.

In November 2017, Keneally was preselected by federal Labor as their candidate for the Bennelong by-election on 16 December. Despite picking up a five percent two-party swing, she lost to the previous incumbent and Liberal candidate John Alexander.

On 30 January 2018, the Labor Party announced that Keneally would fill the vacant New South Wales seat in the Senate left by the previous Senator, Sam Dastyari, who formally resigned earlier that month after an ongoing Chinese-related donations scandal. Keneally was formally appointed to the vacancy on 14 February 2018 and was sworn in as a Senator the following day.

In June 2018, Keneally stated her opposition to mandatory reporting for Catholic priests who are informed of child sexual abuse in confession; she believes it is not the most effective way to prevent abuse. Keneally also attended the Rambam Israel Fellowship Program in Israel, sponsored by the Australia/Israel and Jewish Affairs Council. The lobby group funded “transport, accommodation, meals and other associated costs”.

After the 2019 federal election, new leader Anthony Albanese expressed his intention to bring Keneally onto the frontbench despite opposition from the NSW Right faction. On 29 May, Ed Husic announced his resignation from the frontbench and endorsed Keneally as his replacement. On 30 May, Senate deputy leader Don Farrell announced his resignation from the position to make way for a gender-balanced leadership team (since 2013, two of the four leadership positions were held by women). . Keneally was subsequently announced as the new deputy Senate leader, Shadow Minister for Home Affairs, and Shadow Minister for Immigration and Citizenship. Keneally is currently in a preselection battle for the upcoming election with the SDA Union.