Gahagan was born in Boonton, New Jersey. She became a well known star on Broadway in the 1920s. In 1931 she married actor Melvyn Douglas. Gahagan starred in one Hollywood movie, She, in 1935, playing The Ice Goddess ("She who must be obeyed").
In the 1940s she enterered politics, and was elected to the United States House of Representatives from California for two terms. In 1950 she ran for the United States Senate, but was defeated by Richard Nixon.