Donnay was born of middle-class parents in Paris in 1859. His father was a railway engineer and initially Donnay followed a similar profession, studying at the École centrale des arts et manufactures in 1882.
With Alphonse Allais, Donnay started by writing material for the celebrated cabaret le Chat noir.
Donnay made his serious debut as a dramatist on the little stage of the Chat Noir with Phryne (1891), a series of Greek scenes. This was followed by Lysistrata, a four-act comedy, was produced at the Grand Théâtre in 1892 with Mme Rejane in the title part. With Amants in 1895 he won a great success, and the play was hailed by Jules Lemaître as the Berenice of contemporary French drama. His plays were performed by famous actors including Cécile Sorel, Réjane et Lucien Guitry.
On 14 February 1907, Donnay was elected a member of the Academie Francaise, replacing the late Albert Sorel.