Born Margaret Teresa Yvonne Reed in Butte, Montana, in 1916, Martha began as a singer and comedy performer early in her life. She was born backstage at a local vaudeville theatre in Butte, Montana where her Irish immigrant parents, Peter Reed and Maybelle Hooper, were performing as "Reed and Hooper". Two days after Martha was born, her mother was back doing the act, and Martha began performing in the act when she was three years old. She performed with her brother, Bud, and soon the two children became such a highlight that the act was renamed "Margie and Bud". She continued performing from that point on and once attended the Professional Children's School in New York City.  Her formal schooling, however, was so minimal and only got as far as the fifth grade.  Often she had to have scripts and other written documents read to her by others.

Martha Raye was best known for the size of her mouth, which appeared enormous in proportion to the rest of her face. It relegated her motion picture work to largely supporting comic parts. She became known as "The Big Mouth" and apparently she was often made up in a way which tended to cause it to appear as even larger than it actually already was. For example, she appears in the picture "The Big Broadcast" of 1938 where Bob Hope first sings what became his theme song, "Thanks for the Memories;" however, it is not sung to Ms. Raye, but rather to the female leading actress that she supports. Her title as "The Big Mouth" made her a natural to be the spokesperson for Polident denture cleanser in the 1970s and 1980s.