Mary Downing Sheldon was born in Oswego, New York, on September 15, 1850, the oldest of five children of Frances Stiles and Edward Austin Sheldon, founder and principal of Oswego State Normal and Training School. She was educated in the public schools of Oswego until age sixteen, finishing at the Normal School in 1869. She taught there for two years. In 1871 Sheldon enrolled at the University of Michigan in a classical course, graduating in 1874. She returned to Oswego Normal to teach history, Latin, Greek and botany. In late 1876 she was invited to teach history at Wellesley College where she remained for two and one half years. Her teaching methods, unorthodox for the time and later called the source method, included the use of primary sources, discussion, and problem solving. Because of internal conflicts at Wellesley and poor health she resigned in 1879 and spent a year resting and then two years traveling abroad. She returned to Oswego Normal in 1882 where she wrote her groundbreaking work Studies in General History. It was published in 1885.

On August 6, 1885, she married a former student, Earl Barnes, who was eleven years her junior. Barnes, a teacher of history and psychology, was appointed head of the department of education at Stanford University in 1891. Mary joined the Stanford history department in March 1892 as assistant professor. She taught nineteenth-century European history and the history of the Pacific Slope. Together the they wrote Studies in American History which was published in 1891 and 1896. Mary subsequently published Studies in Historical Method. It was directed toward teachers and nonhistorians who wanted to understand and apply the historical method.

Both Mary and Earl Barnes resigned their posts at Stanford in 1897 to travel and write in Europe. Mary Sheldon Barnes died of heart disease in London, August 27, 1898. According to the author of Barnes' biography in Notable American Women, "[her importance] in American educational history rests chiefly upon her often misunderstood source method. She intended that students should study the primary sources in an 'independent and solitary' way using her questions as guides to problem solving...in order to develop the student's abilities to observe, to weigh evidence, to generalize and to exercise creative historical imagination....This was a more progressive approach than many teachers of her time or later could understand or apply....The source method hastened the improvement of more conventional history textbooks. Critical thinking came to characterize some of the better general education courses a half century later." (Robert E. Keohane in "Mary Sheldon Barnes," Notable American Women, 1607-1950, Cambridge, Belknap Press, 1971)