Alex Salmond led a motion of condolence at the Scottish Parliament, joined by leaders of Labour, Liberal Democrats, Conservatives and the Green and independent group.
Ms MacDonald, 70, who suffered from Parkinson's disease, was a former SNP politician but spent much of her Holyrood career as an independent member.
She was fondly remembered as a witty and engaging personality who stuck to her principles while offering sound advice to others - on issues as diverse as the constitution and what jewellery to wear.
The veteran politician championed "unpopular" and often controversial subjects such as the right to assisted suicide and the plight of prostitutes in the capital, which she represented as MSP for the Lothians.
Mr Salmond said: "She managed to be influential but also widely loved by politicians and people, but particularly by the people."
She was a "force of political" nature after winning the Govan by-election for a seat at Westminster in 1973, he said.
"She held the seat for a mere three months but, arguably, had more influence of real politics than people who sat in Westminster for 30 years," Mr Salmond said.
Labour leader Johann Lamont said: "She had strong views but it was clear that those views did not in themselves define her, they were an expression of the deeply held values which had shaped her life," she said.
"Margo was prepared to explore contentious issues, not balk at them."
But while she was a serious politician she did not take herself too seriously, she said.
"She delighted in the ordinary, the quick quip, the amusing line," she added.
"The silliness of life too - her advice on jackets to wear, make-up to buy, bling to acquire. All of that made her all the more endearing too."
Conservative leader Ruth Davidson said: "Margo's passing leaves this parliament and the political life of this nation a more dull and monochrome place, because she lit it up."
Lib Dem leader Willie Rennie said: "She was trusted and authentic. Margo was able to tread that line between rebellion and credibility."
Ms MacDonald joined two former SNP members and Holyrood's two Green MSPs to form a parliamentary group which she dubbed the "Grindies".
Green leader Patrick Harvie said she was a fantastic source of "juicy" gossip on other politicians.
"I do hope she wrote a lot of that down because there were secrets in that head that don't deserve to be lost," he told MSPs.
Tricia Marwick, presiding officer of parliament, said: "The way she coped with her long, painful illness inspired many, including me, and showed what bravery really was."
She joked that she was often cajoled by Ms MacDonald to wear more jewellery, to the point that she was given a bag full of necklaces.
"I was still reluctant to wear them. After all, how could anyone out bling Margo?" she said.
"But today, just for Margo, I am wearing my bright clothes and am wearing her necklaces."
Ms MacDonald died at her home in Edinburgh.
A colourful celebration of her life will be held in the capital on Friday.
The memorial "is not to be an occasion for mourning", according to her family, who are preparing a playlist of her favourite country music songs and have urged those attending to wear bright clothes.