MacDougall was born the only son of Lieutenant Colonel Sir Duncan MacDougall (1787–1862) and Anne, daughter of Colonel Cornelius Smelt (1748–1832), Lieutenant Governor of the Isle of Man. Educated at a military academy in Edinburgh, then the Royal Military College, Sandhurst, he was commissioned as a second lieutenant in the 79th Regiment of Foot, (Cameronian Highlanders) in 1836. He then served in the 36th (Herefordshire) Regiment of Foot and transferred to The Royal Canadian Rifle Regiment in 1844. He was promoted to major and became Superintendent of Studies at the Royal Military College, Sandhurst in March 1854 and then served in the Crimean War later that year. At its formation, he was appointed commandant of the Staff College. He became adjutant general of the Canadian militia in May 1865 and head of reserve forces in England in 1871. He became Commander of the British Troops in Canada in 1878. Three times, in 1878, 1881 to 1882, and 1882 to 1883, he was the administrator of the government of Canada in the absence of the Governor General of Canada. He retired as a General in July 1885.