MacLeod made his name with Dumbarton in the mid-1970s. He earned selection by the Scottish League in 1978, playing in a 1–1 draw against the Italian League. MacLeod moved to Celtic later that year for a £100,000 transfer fee. During his nine years at Celtic Park, MacLeod won five league titles, two Scottish Cups and one League Cup. MacLeod has the distinction of being awarded with scoring the greatest ever Old Firm goal, in a vote by Celtic supporters in 2000. The goal helped Celtic win the league championship in 1979, in a decisive match against Rangers.
MacLeod rejected a contract offer from Celtic in May 1987 and moved to German club Borussia Dortmund a month later. MacLeod played in 103 Bundesliga games during four years at the Westfalenstadion. He won the German Cup and Super Cup. He returned to Scotland with Hibernian, where he captained the club to a victory in the 1991 Scottish League Cup Final.