From the age of twelve, Grayson trained as an opera singer. She was under contract to MGM by the early 1940s, soon establishing a career principally through her work in musicals. After several supporting roles, she was a lead performer in such films as Thousands Cheer (1943), Anchors Aweigh (1945) with Frank Sinatra and Gene Kelly, and Show Boat (1951) and Kiss Me Kate (1953) (both with Howard Keel).
When film musical production declined, she worked in theatre, appearing in Camelot (1962–1964). Later in the decade she performed in several operas, including La bohème, Madama Butterfly, Orpheus in the Underworld and La traviata.
She was born Zelma Kathryn Elisabeth Hedrick in Winston-Salem, North Carolina, the daughter of Charles E. Hedrick and Lillian Grayson Hedrick (1897–1955). Charles was a building contractor-realtor.
Lillian was of British descent and Charles was of German and Sicilian descent.
The Hedrick family later moved to St. Louis, Missouri, where she was discovered singing on the empty stage of the St. Louis Municipal Opera House by a janitor, who introduced her to Frances Marshall of the Chicago Civic Opera, who gave the twelve-year-old girl voice lessons.
Grayson's sister, Frances Raeburn (born Mildred Hedrick) was also an actress and singer, appearing alongside her in the film Seven Sweethearts. She also had two brothers, Clarence "Bud" E. Hedrick, and Harold.
Grayson married twice, first to actor John Shelton (born Edward S. Price) and then to the actor/singer Johnnie Johnston.
Shelton and Grayson eloped to Las Vegas, Nevada, where they were married on July 11, 1941. The two had courted for 18 months, after meeting while making screen tests.
In July 1942, Shelton moved out of their Brentwood home and into his own apartment. This came after a month of reconciliation after a judge dismissed their divorce suit. Grayson charged Shelton with mental cruelty. They divorced on June 17, 1946.
Grayson wed Johnston on August 22, 1947 in Carmel, California. On October 7, 1948, Grayson's only child, daughter Patricia "Patty Cake" Kathryn Johnston was born. Grayson and Johnston separated on November 15, 1950. On October 3, 1951, Grayson was given a divorce from Johnston on the grounds of mental cruelty. Johnston's This Time for Keeps co-star, Esther Williams, claimed in her 1999 autobiography that while making the film, Johnston would read Grayson's intimate letters aloud to the girls in his fan club, including the "all-too-graphic details concerning what she liked about his love-making."
Though she never married again, Grayson was frequently seen in the late 1950s with Robert Evans.
According to her secretary, Grayson died in her sleep at her home in Los Angeles, California on February 17, 2010, aged 88.