As a youth, McCarthy played in the 1969 Quebec International Pee-Wee Hockey Tournament with the Winnipeg St. James minor ice hockey team. Playing for his hometown Winnipeg Monarchs, McCarthy was one of the most dominant junior defenders of his era. Following a memorable 1976–77 season in which he set WCHL records for defenders with 105 assists and 127 points, he was selected in the first round in the 1977 NHL amateur draft by the Philadelphia Flyers. McCarthy stepped straight into the Flyers' roster in the 1977–78 season, posting 2 goals and 17 points along with a stellar +29 rating. Early in the 1978–79 campaign, however, he was dealt to the Vancouver Canucks in a deal for Dennis Ververgaert. The deal would prove controversial, as McCarthy was damaged goods and played only a single game for Vancouver before requiring surgery for a pre-existing hip condition. Back to full health in 1979–80, McCarthy would be a revelation for Vancouver as he led the team's blueliners with 15 goals and 45 points and finished 3rd in overall team scoring. It would be the first of four consecutive 40-point seasons on the Canuck blueline for McCarthy, who impressed with his powerful point shot and fine outlet passing and was quickly becoming the team's top all-around defender. McCarthy responded with the finest season of his career, tying a team record for defenders with 16 goals and registering a career-high 53 points. He was also selected to represent the Canucks in the 1981 NHL All-Star Game in Los Angeles. After another fine season in 1981–82, McCarthy would suffer a broken ankleon the eve of the 1982 playoffs, and was forced to watch from the pressbox as the Canucks marched all the way to the Stanley Cup Finals before losing to the New York Islanders. Stan Smyl captained the Canucks on their Cinderella run to the finals. After a poor start to the 1983–84 season, McCarthy would be a victim of a rebuilding process in Vancouver and was dealt to the Pittsburgh Penguins for a draft pick, one of three top defenders shipped out within a few months of each other. He re-discovered his offensive game in Pittsburgh, posting 20 points in 31 games, but was a horrific -32 over that stretch for the last-place Penguins. After a disappointing 1984–85 season in which he slumped to just 19 points, he was released by the Penguins. After his release from the Penguins, McCarthy returned to Philadelphia, signing with the Flyers as a free agent. However, his career was on the downturn and he spent most of the next three seasons in the minors with the Hershey Bears, appearing in only 6 games for the Flyers over that stretch. He retired in 1988. In 537 career NHL games, McCarthy amassed 67 goals and 191 assists for 258 points along with 527 penalty minutes. His 51 goals were the most ever by a Vancouver Canuck blueliner at the time of his departure, and he remains 6th all-time for the club in that category.
Coaching career
During his time as a player in Hershey, McCarthy developed a quality reputation for his leadership and work with young players, and was promoted to a player-assistant coach during the 1987-88 season. Following his retirement, he remained as an assistant coach for the Bears, and was promoted to head coach for the 1989-90 season. After a season in that capacity, he then spent two seasons as pro scouting director for the Philadelphia Flyers. He went on to serve as an assistant coach with the Hartford Whalers from 1992 until 1995 before returning to the AHL to take on head coaching duties with the Springfield Falcons and the Beast of New Haven. McCarthy served as an assistant coach for the Carolina Hurricanes from 1999–2009, and won the Stanley Cup as a member of the Hurricanes' coaching staff in 2006. McCarthy was brought into the Philadelphia Flyers organization as an assistant coach with head coach Peter Laviolette. On October 7, 2013 McCarthy, along with head coach Peter Laviolette, was relieved of his assistant coach position by Flyers general manager, Paul Holmgren. On May 6, 2014, Laviolette and McCarthy were hired by the Nashville Predators as head coach and assistant coach, respectively. On July 21, 2017, McCarthy was promoted to Associate coach, after Phil Housley was hired by the Buffalo Sabres and Dan Muse was hired by the Nashville Predators as an assistant coach. On January 6, 2020, Laviolette and McCarthy were fired by the Nashville Predators.