McKay was born at the Hudson's Bay Company's Edmonton House, the son of James McKay and Marguerite Gladu. He was a fur-trader and guide/interpreter with the HBC and later became a political figurein the RedRiver Colony. McKay was educated at Red River and began work with the HBC in 1853. It is a testament to his skills that many distinguished visitors sought him out as a guide. He often met the HBC governor, George Simpson in Crow Wing, Minnesota and escorted him to Upper Fort Garry. In 1857, while at Fort Ellice, he was engaged to guide the John Palliserparty from Fort Ellice through the Saskatchewan plains to its winter quarters at Fort Carlton. McKay married in 1859 and left the HBC in 1860, going into business for himself. He established his home west of the Forks in present-day Manitoba and quickly became involved in this community. He was made a member of the Council of Assiniboia in 1868, and caught up in the hostilities in the Red River Colony during 1869–70. Because of his Métis heritage, he chose to leave the community for a short time. On his return, he was made a member of the provisional government. He was a brother to Angus McKay who was active in the political unrest of the time.
McKay was appointed as a member of the Temporary North-West Council along with Pierre Delorme and Joseph Royal in 1873. These appointments were made in response to demand by Métis who wanted representation in the government. While he was on the council he worked on dealing with problems affecting the native population. His skills, both as a negotiator and interpreter, made his input instrumental in a number of Treaty negotiations.
James McKay made important contributions in the settlement of Indian land claims. He was part of the negotiation of Treaty 1 and Treaty 2 in 1871. He continued with Treaty 3 in 1873. In 1875, he was a commissioner for Treaty 5, which was negotiated at Winnipeg. He also was Indian commissioner for Treaty 6 which was signed at Fort Carlton and Fort Pitt in 1876.
Province of Manitoba
After Manitoba became a province, he was appointed to the Legislative Council of Manitoba, serving as its speaker until 1874. After the council was abolished in 1876, he was elected by acclamation to the Legislative Assembly of Manitoba for the district of Lake Manitoba. McKay served as Minister of Agriculture from 1875 to 1878, when he resigned due to poor health. He was considered to have excellent judgment; but influenced strongly by the views of the Archbishop Alexandre-Antonin Taché.