Born Peggy Yvonne Middleton in Vancouver, Canada, De Carlo began working in Hollywood in the 1940s in a series of bit parts. By the late 1940s, however, she began to graduate to leading roles in films such as Song of Scheherazade, Casbah, and The Gal Who Took the West. She worked steadily through the 1950s, with her best known role being Sephora, Moses' wife, in Cecil B. DeMille's epic The Ten Commandments.
In 1964, she was cast as Lily Munster in the TV series The Munsters; the show had a three-year run in primetime but is still seen in syndication. She reprised that role in the 1981 television movie The Munster's Revenge. Her last credited role was in the 1995 television movie The Barefoot Executive.
Follies was her only Broadway show, but she made quite an impression singing the now-standard "I'm Still Here." The show's cast also featured Dorothy Collins, Alexis Smith, Gene Nelson, and John McMartin.
De Carlo was married to the actor Robert Morgan from 1955-1968; the couple had two sons, Michael, who died in 1997, and Bruce.