McDonald started off as a trainee with Southampton in 2001 where he managed only three appearances (one first-team start and two as a substitute), being loaned to Huddersfield Town where again he had chances to play first team football. McDonald scored just once for Huddersfield, in a 2–1 defeat to Tranmere Rovers and Bournemouth (scoring once against Shrewsbury). Upon reaching the end of his contract with Southampton he signed for Wimbledon on a rolling monthly contract.

He had talks with Drogheda United in 2003 but failed to agree terms.

McDonald went on trial with Scottish Premier League club Dundee United, but failed to win a contract and instead signed for league rivals Motherwell in January 2004. After signing for Motherwell, McDonald had a slow start, scoring only one goal during the second half of the 2003–04 season despite impressive performances. The following season he scored 15 goals. McDonald famously scored two late goals against Celtic at the end of the 2004–05 season to deny them the Scottish Premier League title which was instead won by their arch-rivals Rangers. In the 2005–06 season, McDonald scored 11 goals in 35 appearances, and in the following season, scored 15 goals in 32 appearances. His goal against Falkirk on 25 November 2006, was the 5000th goal in the SPL since its formation in 1998. In his successful stint with Well, he scored 45 goals in 108 appearances.

Having represented Australia at under-17, under-20 and under-23 levels, McDonald made his international debut for Australia against Bahrain on 22 February 2006 in an Asian Cup qualifier. He played in the 2003 FIFA World Youth Championship. McDonald was a starter in the Australia squad that started off qualification for the 2010 World Cup with a 3–0 win over Qatar in February, setting up a goal for Mark Bresciano, but yet to score a goal at international level himself. On 11 May 2010 McDonald was named by Australian coach Pim Verbeek in a provisional 31-man squad for the 2010 World Cup. On 25 May it was announced that he had been omitted from the final 23-man squad for the finals.

In December 2007, McDonald was named BBC Sportsound Player of the Year for his eight man-of-the-match performances throughout the 2006–07 season.

In March 2007, after a £400,000 bid from Rangers had been rejected in January, Motherwell accepted an offer of £700,000 from McDonald’s boyhood favourites Celtic, with McDonald moving to Celtic Park at the start of the 2007–08 season.

McDonald made his competitive debut for Celtic in the first leg of the UEFA Champions League third qualifying-round match against Spartak Moscow at Luzhniki Stadium, assisting Paul Hartley for Celtic’s goal as the game finished 1–1. His first goal for the club came in the second leg of the tie at Celtic Park. A mistake by Spartak defender Roman Shishkin allowed McDonald to slip in and hit the ball first time past Stipe Pletikosa. This match also ended 1–1, but Celtic won 4–3 on penalties. Just days later in an away league match against St Mirren, McDonald latched onto a long Gary Caldwell pass to lob Chris Smith from a tight angle and score his first SPL goal for the club. He followed that up with the winning goal in the final minute of their 2–1 UEFA Champions League group-stage win against A.C. Milan on 3 October and another last minute winner just days later at Gretna. In a pulsating clash with Old Firm rivals Rangers on 16 April 2008, McDonald set up his Dutch strike partner Jan Vennegoor of Hesselink for a last minute goal that kept Celtic in the 2007–08 SPL title race, before scoring a double and winning a penalty scored by Barry Robson in another vital 3–2 Old Firm victory eleven days later. At the end of the season, McDonald was rewarded with a new five-year deal at Parkhead and was nominated for SPL Player of the Year. He scored 25 goals in 36 league appearances in his first season at Celtic and was the top goalscorer during the 2007–08 season, beating the next highest goalscorer and strike partner Vennegoor of Hesselink by 10 goals. This breakthrough season included two hat-tricks; against Dundee United and former club Motherwell. In total, McDonald scored 31 times in his first season at Parkhead.

McDonald wore the number 27 shirt in his first season with Celtic, but in July 2008 he was given number 7, which he also wore at Motherwell. After a sluggish start to the 2008–09 season, not scoring in any of the first four games, he opened his account against Motherwell, scoring Celtic’s third goal in a 4–2 win at Fir Park. On 5 November 2008 McDonald scored the opening goal in a 1–1 draw with Manchester United at Celtic Park in the Champions League with a well executed lob over Ben Foster. Only three days later, McDonald continued to haunt his former club Motherwell with a low strike from outside the penalty area. Celtic won this match 2–0. On 27 December 2008, he scored the only goal in a 1–0 victory at Ibrox during the Old Firm derby, helping his team bring the three points home. On 27 January 2009, McDonald scored twice in the dramatic 11–10 penalty shoot-out victory against Dundee United to send Celtic through to the League Cup final, which they won 2–0 against archrivals Rangers. This win gave McDonald his first domestic cup trophy at Celtic.

In early January 2010, Celtic rejected a transfer bid from Premier League side Wigan Athletic for the Australian striker, but on 1 February – transfer deadline day – Celtic sold McDonald to Middlesbrough for a reported £3.5 million. He joined up with Gordon Strachan, whom he played under at Celtic and Southampton, and also rejoined four of his former teammates, Willo Flood, Barry Robson, Chris Killen and Stephen McManus. On 16 February 2010, he missed a penalty against Blackpool in a 2–0 loss. McDonald scored his first Middlesbrough goal in the Tyne-Tees derby against Newcastle on 13 March. After a return from injury, McDonald scored three times in four games against Crystal Palace, Sheffield Wednesday and Coventry City.

McDonald made a bright start to the 2010–11 season scoring twice in his first two games against Ipswich and Chesterfield in the League Cup. On 9 November 2010, he scored the second in Middlesbrough’s 2–0 win over Scunthorpe. On 1 March 2011, McDonald scored the opener in his team’s 1–1 draw with Nottingham Forest, he followed this by scoring the leveller in his team’s 2–1 victory at home to Watford on 19 March 2011. McDonald followed this by scoring twice in two games, in two draws against Ipswich Town and Barnsley. On 23 April 2011, McDonald scored a hat-trick in Middlesbrough’s 2–4 away win at Hull.

McDonald scored his first goal of the 2011–12 season in a 3–1 victory over Barnsley on 16 August 2011. On 5 November 2011, he got his first in 12 matches, scoring the only goal in Middlesbrough’s 1–0 victory over Watford at the Riverside. He scored a brace in Middlesbrough’s 2–2 draw with Blackpool. On 10 December, McDonald scored the only goal of the game against Brighton, after a defensive error from Casper Ankergren. McDonald continued his impressive form, as he scored Boro’s second in a 3–2 victory, over Welsh side Cardiff City. McDonald then scored in the New Year’s Eve clash against Peterborough at the Riverside, the game finished 1–1.

On 6 October 2012, McDonald made his first appearance of the season against Watford, as a first half sub, coming on for teammate Justin Hoyte, in which McDonald scored the winner in a 2–1 victory. Continuing from the Watford game, McDonald came off the bench to score a brace in Middlesbrough’s 2–1 win against Bolton. His form continued as he scored the winning goal in a Tees – Wear derby against Sunderland resulting in a 1–0 victory to the Boro.

McDonald’s most recent appearance came on 15 August 2012 against Scotland coming on as a substitute in the second half, playing alongside fellow Middlesbrough teammate Rhys Williams. Australia went on to lose 3–1.

On 23 July 2013, McDonald signed a two-year contract with Millwall. He scored his first goal for the club in a 1–0 victory over Charlton. McDonald left Millwall on 24 January 2015, with the club cancelling his contract.

On 26 February 2015, McDonald signed for Motherwell for a second time, agreeing a contract until the end of the 2014–15 season. He made his second debut on 28 February 2015, in a 2–1 win against Inverness CT. He scored his first goal since returning to the club on 7 March 2015, scoring with a free-kick in a 1–1 draw against Kilmarnock.

On 21 July 2015, McDonald signed a new one-year contract, with the option of a second. On 1 July 2016, McDonald signed a new one-year contact to stay at Motherwell. Later that month, Motherwell rejected an offer from an unnamed A-League side, later revealed to be the Western Sydney Wanderers, for McDonald.

In May 2017, Motherwell announced that McDonald would be leaving the club after he had decided not to take up the option of another year on his contract.

Following his departure from Motherwell, McDonald was expected to return to Australia. However it was announced in July 2017 that he had signed for Scottish Championship club Dundee United on a one-year deal. After one season with United, McDonald was released at the end of his contract.

On 15 February 2019, McDonald came out of retirement to sign for Partick Thistle until the end of the season. McDonald scored on his debut for Thistle after coming off the bench in a 2-0 away win over Alloa. McDonald went onto play a massive role in helping Partick Thistle avoid relegation from the Scottish Championship, with McDonald scoring 7 goals in 13 appearances in all competitions for the Jags McDonald left the club at the end of the season to return to Australia.

On 8 May 2019, McDonald returned home to Melbourne and signed for new A-League club Western United ahead of the 2019–20 A-League season. His first goal for the new club came against Melbourne Victory in Round 4, scoring the winner in a come-from-behind 3-2 triumph.

On 16 January 2020, McDonald joined Brisbane Roar under Robbie Fowler, signing an 18-month contract.