Born in Illinois, Dunham studied anthropology at the University of Chicago before traveling to Haiti to study Caribbean culture; she later incorporated the dance of the region into her own choreography.

After moving to New York, she choreographed for and danced in Broadway shows as well as touring with her company and appearing in a series of films. She also taught movement classes to such actors as Marlon Brando and James Dean. In 1963, she became the first black choreographer at the Metropolitan Opera, where she helped stage Aida.

In 1965, she shut down the troupe and traveled to Senegal to advise that country's cultural ministry; two years later, she returned to the United States and moved to East St. Louis, Illinois, where she created an African-American cultural center for local youngsters.

In the last decades of her life, Dunham was focused almost entirely on activism, although she came out of retirement in 1972 to direct Scott Joplin's opera Treemonisha.

She won the Presidential Medal of the Arts and the Kennedy Center's Albert Schweitzer Prize, among other honors.