During World War I Macaulay worked in the British Propaganda Department, after some time as a nurse and later as a civil servant in the War Office. She pursued a romantic affair with Gerald O’Donovan, a writer and former Jesuit priest, whom she met in 1918; the relationship lasted until his death, in 1942. During the interwar period she was a sponsor of the pacifist Peace Pledge Union; however she resigned from the PPU and later recanted her pacifism in 1940. Her London flat was utterly destroyed in the Blitz, and she had to rebuild her life and library from scratch, as documented in the semi-autobiographical short story, Miss Anstruther’s Letters, which was published in 1942.

The Towers of Trebizond, her final novel, is generally regarded as her masterpiece. Strongly autobiographical, it treats with wistful humour and deep sadness the attractions of mystical Christianity, and the irremediable conflict between adulterous love and the demands of the Christian faith. For this work, she received the James Tait Black Memorial Prize in 1956.

She was created a Dame Commander of the Order of the British Empire (DBE) on 31 December 1957 in the 1958 New Years Honours and died ten months later, on 30 October 1958, aged 77, an active feminist throughout her life.