McDonnell was born in Cushendall on 14 April 1763, son of Michael and Elizabeth (Stewart).
Under his mother’s influence James and his brothers were brought up as Protestants although their father was a Catholic. James was educated in the Red Bay caves and then in David Manson’s school in Donegall Street in Belfast.
In 1780 James went to Edinburgh University where he graduated as a doctor and returned to his own practice at 13 Donegall Place where he remained for the rest of his life.
He was involved in local artistic and literary activities. In 1792 McDonnell helped to organise the Belfast Harp Festival; four years earlier he had help set up the Belfast Reading Society (now the Linen Hall Library) and was a member of the Belfast Natural History and Philosophical Society.
He was a friend of the leading personalities in the United Irishman movement including Wolfe Tone, Henry Joy McCracken and others.
While McDonnell was sympathetic to the aims of the United Irishmen he did not favour violence. When Henry Joy McCracken was hanged for his part in the Rebellion, McDonnell was asked to revive him, he did not attend but sent his brother instead.
In 1792 McDonnell helped to set up the Belfast General Dispensary in the General Hospital in Frederick Street which then became Royal Victoria Hospital.