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Merkel resembled the popular actress Lillian Gish, and her resemblance allowed her to begin her career as a stand-in for Gish in 1920`s Way Down East (she also did stand-in work for Gish in 1928`s The Wind). She appeared in a few films during the silent era, including the two-reel Love`s Old Sweet Song (1923) filmed by Lee DeForest in his Phonofilm sound-on-film process. However, she spent most of her time in New York City working on Broadway. Merkel returned to Hollywood and achieved her greatest success with the advent of "talkies".

She played Ann Rutledge in the film Abraham Lincoln (1930) directed by D. W. Griffith. During the 1930s, Merkel became a popular second lead in a number of films, usually playing the wisecracking best friend of the heroine, supporting actresses such as Jean Harlow, Carole Lombard, Loretta Young, and Dorothy Lamour. With her kewpie doll looks, combined with a strong Southern accent and wry line delivery, she enlivened scores of films of the era and worked with most of the stars of the period.

Merkel was an MGM contract player from 1932 to 1938, appearing in as many as twelve films in a year, often on loan-out to other studios. She was also often cast as leading lady to a number of comedians in their starring pictures, including Jack Benny, Harold Lloyd, and Charles Butterworth.

One of her most famous roles was in the Western Destry Rides Again (1939) in which her character, Lillibelle, gets into a famous "cat-fight" with Frenchie (Marlene Dietrich) over the possession of her husband`s trousers, won by Frenchie in a crooked card game. She played the elder daughter to the W. C. Fields character, Egbert Sousé in the 1940 film The Bank Dick.

She appeared in both the 1934 and the 1952 film versions of The Merry Widow, playing different roles in each.

Merkel`s film career went into decline during the 1940s and although she continued working, it was in much smaller productions. In 1950 she was leading lady to William Bendix in a baseball comedy Kill the Umpire which was a surprise hit. She made a comeback as a middle-aged woman playing mothers and maiden aunts, and in 1956 won a Tony Award for her role on Broadway in The Ponder Heart. She had a major part in the MGM 1959 film, The Mating Game as Paul Douglas`s wife and Debbie Reynolds`s mother. She was nominated for an Academy Award for Best Supporting Actress in Summer and Smoke (1961). Merkel, whose final film role was in the Elvis Presley film Spinout (1966), has a star on the Hollywood Walk of Fame for her contributions to Motion Pictures, at 6230 Hollywood Boulevard. She died in Los Angeles, California, aged 82, of undisclosed causes.

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