Compton Mackenzie was born into a theatrical family. His father, Edward Compton, was an actor and theatre company manager; his sister, Fay Compton, starred in many of James M. Barrie's plays, including Peter Pan, or The Boy Who Wouldn't Grow Up. He was educated at St Paul's School and Magdalen College, Oxford where he obtained a degree in Modern History.

Mackenzie was married three times and aside from his writing also worked as an actor, political activist, and broadcaster. He served with British Intelligence in the Eastern Mediterranean during World War I, later publishing four books on his experiences. Compton Mackenzie was from 1920–1923 Tenant of Herm and Jethou and he shares many similarities to the central character in D.H. Lawrence's short story The Man Who Loved Islands, despite Lawrence saying "the man is no more he than I am." Mackenzie at first asked Secker, who published both authors, not to print the story and it was left out of one collection.