In 1960, Murray filed a lawsuit (Murray v. Curlett) against the Baltimore, Maryland School District in which she claimed it was unconstitutional for her son William to participate in Bible readings at Baltimore public schools. She further went on to claim that her son's atheism had made him the victim of violence from other classmates, violence that she claimed was overlooked by administrators who didn't care if injury were to befall an atheist.

In 1963, this suit (amalgamated with the similar Abington School District v. Schempp) reached the United States Supreme Court which voted 8-1 in her favor, effectively banning 'coercive' public prayer and Bible-reading at public schools in the United States. Public opinion was such that in 1964, Life magazine referred to Madalyn Murray as the most hated woman in America.

American Atheists
Following the Supreme Court decision, Madalyn founded American Atheists, "a nationwide movement which defends the civil rights of non-believers, works for the separation of church and state, and addresses issues of First Amendment public policy." She acted as its first CEO before later handing that office on to her son Jon Garth.

In 1965, Madalyn married Richard O'Hair. Throughout the 1970s she publicly debated religious leaders on a variety of issues and also produced an atheist radio program in which she criticized religion and theism. She filed lawsuits on many issues over which she felt there was a collusion of church and state in violation of the Constitution. Richard O'Hair seems to have dissappeared from the scene, and his fate remains unknown.

In 1980, her son William converted to Christianity and was "born again" at a Baptist Church in Dallas, Texas, where he took up work as a preacher. In sermons, he accused his mother of using him as a tool in her crusade, claiming she had lied about her reasons for filing the lawsuit against Maryland, and that he had never been the victim of any kind of violence at the hands of his Christian classmates.

He said that the true reason for his mother filing the suit was her deep personal hatred for followers of Christianity. William said her zeal against Christianity was so great that it had taken over her life and rendered her incapable of seeing other people (himself included) as anything but either enemies or people who agreed with her every ideal. Murray called her son's conversion "unforgivable" and spoke of symbolically murdering him for what she viewed as a transgression against her: "One could call this a postnatal abortion on the part of a mother, I guess; I repudiate him entirely and completely for now and all times...He is beyond human forgiveness."

Madalyn Murray O'Hair clashed not only with religious believers but with many atheists. She expelled members of American Atheists who did not conform to her ideas of how atheists should behave. In a 1982 address, she criticized a wide variety of atheists as being unacceptable, seemingly all except those whom the psychologist Abraham Maslow might have characterized as engaged in self-actualization.

Disappearance and death
On August 27, 1995, Madalyn, Jon Garth, and Robin Murray O'Hair (William's daughter who had been adopted by Madalyn) disappeared from the headquarters of American Atheists, leaving a note implying an absence for some time and a visit to San Antonio, Texas. In September, Jon ordered $600,000 (USD) worth of gold coins from a San Antonio jeweler but took delivery of only $500,000 (USD). No further communication came from any of the O'Hairs, and one year later, William Murray (Madalyn's son) filed a missing persons report.

There was speculation that the O'Hairs had abandoned American Atheists and fled with the money. One investigator concluded they had gone to New Zealand. Other theories suggested fundamentalist Christians had kidnapped the trio. Another rumor was that Madalyn had died of natural causes, and that her remains had been secretly disposed of to prevent the possibility of a "Christian burial" of her by her Christian son. The O'Hairs were declared legally dead, and many of their assets were sold to clear up their debts.

Ultimately a murder investigation focused on David Roland Waters, who had worked as an office manager and typesetter for American Atheists and who had previous convictions for violent crimes and also one for stealing $50,000 from the organization. Police concluded that he and his accomplices had kidnapped the O'Hairs, forced them to withdraw the missing funds, and then murdered them. Waters eventually pled guilty to reduced charges.

Subsequently, in January 2001, Waters informed the police that the O'Hairs were buried on a ranch in Texas, and gave them the exact location of the ranch and the bodies. When the police excavated there, they discovered that the O'Hairs' bodies had been cut into dozens of pieces with a saw. The remains exhibited such extensive mutilation and successive decomposition that identification had to be made through dental records, by DNA testing, and in Madalyn's case, by her prosthetic hip.

Legacy
Some atheists have contended O'Hair's aggressive (some say abrasive) strategy of direct confrontion with mainstream Christianity, which included specific attacks on its validity using quotes from the Bible, was flawed and ultimately undermined efforts to encourage and preserve secularism in schools and government.

She has also been criticized for failing to adequately address issues of ethics and morality as they relate to a non-religious outlook (given that many Christians are reported to erroneously believe atheists are "by definition" immoral). By the time of her death the word atheist had become so closely associated with her name and personal views (especially in the United States) that it was already declining in popularity among atheists and various efforts have been made to introduce a new term into common use.

Urban legend
Madalyn Murray O'Hair achieved posthumous notoriety among users of the Internet through a seemingly unsquashable urban legend. An endlessly circulating e-mail (mostly exchanged among Christians) claimed "Madalyn Murray O'Hare is attempting to get TV programs such as Touched by an Angel and all TV programs that mention God taken off the air" (the e-mail invariably misspelled O'Hair's name).

It cited a petition RM-2493 to the FCC which had nothing to do with O'Hair, and which was denied in 1975, concerning the prevention of educational radio channels being used for religious broadcasting. A variant acknowledging her death was circulating in 2003, still warning about a threat to Touched by An Angel months after the program's last episode had been aired. In 2006 similar e-mails were still being reported, eleven years after O'Hair's disappearance and long after her confirmed death.