McMartin was born in Warsaw, Indiana, on August 21, 1929, and raised in St. Cloud, Minnesota. After graduating from high school, he joined the United States Army and became a paratrooper in the 101st Airborne Division. He attended Columbia College Chicago, but did not graduate and later attended college in New York. He made his off-Broadway debut in Little Mary Sunshine in 1959, opposite Eileen Brennan and Elmarie Wendel. He won a Theatre World Award for his role as Corporal Billy Jester, and married one of the show's producers, Cynthia Baer, in 1960; they divorced in 1971.
McMartin's first Broadway appearance was as Forrest Noble in The Conquering Hero in 1961, which was followed by Blood, Sweat and Stanley Poole. He created the role of Oscar in Sweet Charity in 1966, opposite Gwen Verdon, garnering a Tony nomination, and played the role again in the 1969 film opposite Shirley MacLaine. He was reportedly cast in Stephen Sondheim's A Funny Thing Happened on the Way to the Forum in 1962, but his role was cut before the show opened.
McMartin later starred in the original Broadway production of Sondheim's Follies opposite Alexis Smith in 1971 as Benjamin Stone, introducing the ballad "The Road You Didn't Take". His association with Sondheim continued, as he appeared in A Little Night Music as Frederick at the Ahmanson Theatre, Los Angeles, in 1991. The reviewer for the Orange County Register wrote that McMartin was "aggressively deadpan as her rediscovered old flame".

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