When it was first published in 1963, The Group rapidly became a book that everyone read without wanting to admit it. Its frank descriptions of sex, contraception and breast-feeding as they affected a group of eight female graduates in 1930s America caused such a scandal that the novel was banned in Australia as an offence to public morals. Norman Mailer, a man whose own writing did not shy away from graphic depictions of the sexual act, dismissed The Group in the New York Review of Books as "a trivial lady writer's novel" infused with a "communal odour [that] is a cross between Ma Griffe and contraceptive jelly".

The book's author, Mary McCarthy, was not expecting such a furore. In spite of her status as one of America's leading women of letters, a writer with a reputation for acerbic insights and penetrating prose, she found that the intellectual, liberal circles in which she moved were quick to disparage her bestseller as little more than a superficial potboiler. At a dinner party in New York two months after its publication, the 51-year-old McCarthy burst into tears when a fellow guest admitted that he did not like the book, and when her close friend, the critic Elizabeth Hardwick, wrote a mean-spirited satire in the Partisan Review, McCarthy was hurt and puzzled by the betrayal.

For years afterwards, McCarthy received letters from irate readers accusing her of a "perverted outlook on life". She was shunned by her former university contemporaries, many of whom felt they had been mercilessly pilloried in the book. Despite the fact that The Group went on to top the New York Times bestseller list for almost two years, the experience was still raw enough for McCarthy to admit in a 1989 newspaper interview shortly before her death that she thought The Group had "ruined my life".

And yet it is for The Group that McCarthy is best remembered. Although many critics, like Mailer, argued that her earlier, less well-known works showed greater promise – her first novel, The Company She Keeps, published in 1942, or the autobiographical Memories of a Catholic Girlhood – The Group would become more influential than any of them. It had a lasting impact on subsequent generations of female writers, many of whom were struck by the candour and veracity of McCarthy's prose at a time when such things were simply not openly discussed and especially not by women. "She talked about the things you knew," says the award-winning biographer Claire Tomalin, who first read The Group as a young married woman with small children. "It all rang true. She opened a further door into brutal frankness. There was something so crisp and clever and bold about her writing."

McCarthy did not shy away from the discomfiting or the indiscreet. In one early scene, the sexually inexperienced Dottie Renfrew gets fitted for a Dutch cap after a one-night stand with a self-confessed bounder. In a later chapter, the eager-to-please Priss Hartshorn is shown struggling to breast-feed her newborn baby in order to test the new theories of motherhood espoused by her paediatrician husband. For Tomalin, and others like her, such scenes spoke directly to their own experience.

The timelessness of McCarthy's subject matter has prompted Virago to republish The Group next month for a new audience. On rereading, it becomes immediately apparent that McCarthy's characters confront many of the same issues as their modern counterparts: sex and contraception, career and marriage, love and lust, fidelity to one's husband versus loyalty to one's friends and the attempt to carve out a place for oneself unconstrained by the gender limitations of previous generations.

Its continuing relevance is one of the book's most extraordinary attributes. When Candace Bushnell was advised by an editor in the early 1990s to write "the modern-day version of The Group", she responded with Sex and the City, a collection of confessional essays about a group of female friends that spawned a multimillion-dollar TV series and film. "The Group reminds us that not much has really changed," writes Bushnell in the foreword to the new edition. "It's a book I prize, not only for its blistering satire, but for its technical elements, including McCarthy's brilliant use of the soliloquy, her pacing and razor-sharp descriptions."

For Hilary Mantel, whose most recent novel, Wolf Hall, won this year's Booker prize, The Group is "absorbing, funny, painful… a beautifully managed novel… I consider it a masterpiece". For AS Byatt, it was "the energy and brio of the storytelling" that first caught her imagination. "Also, the hard-headed descriptions of sex and contraceptives were cool and funny. I think the area in which it most affected my own work was its precise candour about sex." Byatt adds: "I didn't (and don't) think of The Group as a 'feminist novel'. It was a novel about a group of women from which most feminists could learn things – about moral and emotional traps set by society, for instance – but its intention was literary, storytelling, shocking rather than forwarding a cause."

Although McCarthy repeatedly distanced herself from the idea of being a "feminist" writer (she once described feminism as a cocktail of "self-pity, shrillness and greed"), her insistence on seeing women as they truly were, rather than how society wanted them to be, was in its own way revolutionary. The Group was published at a time of considerable flux in America. It was the year that Kennedy was assassinated, a time when the myth of the contented domesticity of previous generations was beginning to be challenged. A few months before it came out, Betty Friedan had published The ­ Feminine Mystique, a sociological study that brought to light the lack of fulfilment in women's lives based on the results of a questionnaire sent to 200 of her university contemporaries. Friedan called it "the problem with no name": the nagging dissatisfaction that lay at the heart of many women's experience despite a gloss of financial security.

McCarthy's novel was set in 1933, but it dealt with precisely the same issues that Friedan had identified. In The Group, the female characters set out to make their own way in Roosevelt's New Deal America, only to discover that they are just as economically and emotionally dependent on men as their mothers were. They believe in romantic love even though it costs them their independence and their idealistic, liberal politics come to nothing when the novel ends with the outbreak of the Second World War.

It was the women's submissiveness that most enraged Norman Mailer, who claimed that McCarthy's novel was fatally diminished by the fact that none of her characters has "the power or dedication to wish to force events", while conspicuously missing the point that it was precisely this enforced passivity that McCarthy wished to highlight.

In this, she was undoubtedly informed by her own life. By the time The Group was published, McCarthy had been married four times – her second husband, the literary critic Edmund Wilson, refused to allow her to keep her own bank account and, according to McCarthy, had her committed to a psychiatric hospital against her will, claiming she was "hysterical". McCarthy had endured a troubled childhood – both her parents died in the 1918 flu epidemic and she was sent to live with a great aunt and uncle, whom she later accused of having violently beaten her on a daily basis.

It was when McCarthy won a place at Vassar, the single-sex, liberal arts college in Poughkeepsie, New York, that she rapidly set about reinventing herself. Vassar represented academic success and an escape from her difficult upbringing, but in spite of her ferocious intelligence, McCarthy never felt she was fully accepted into the socially elite milieu in which she found herself. She came to rely on her intellect to win her friends, but it rewarded her with admiration rather than acceptance and she was left feeling like an outsider.

The status of outsider is arguably what minted McCarthy's reputation as a writer. Her early short stories and essays display her incisive critical eye and an ability to record every detail with unflinching accuracy. "She felt she had a kind of obligation to tell the truth as she saw it," says her son, Reuel Wilson. "She was a very meticulous chronicler of the minor details of everyday life: what people ate, what they wore, what they drank."

McCarthy's detractors criticise her for concentrating on the outward ephemera of her characters' lives rather than giving them psychological depth, but in The Group her ability to convey a personality with the precision of a single phrase is deployed to devastating effect. Self-important Norine Schmittlapp, for instance, is described as living in a squalid apartment that smells of "soured dishcloth". "Bedding with her… must be like rolling in a rich mouldy compost of autumn leaves, crackling on the surface, like her voice, and underneath warm and sultry from the chemical processes of decay."

For McCarthy's Vassar contemporaries, many of whom appeared as recognisable characters in the novel, it was difficult not to feel that old scores were being settled. To them, McCarthy's satirical tone seemed perilously close to naked contempt – as though having failed to assimilate she was now determined to retaliate. In Seeing Mary Plain, Frances Kiernan's 2000 biography of McCarthy, several of McCarthy's former Vassar classmates are quoted as being unhappy about their portrayal. One of them claimed that McCarthy was "trying to make up for the fact that she always felt socially inferior".

McCarthy was stung by the fallout at first, insisting that her characters were composites. But a year after The Group's publication, she told the New York Herald Tribune that the book had indeed resulted from "putting real plums into an imaginary cake". By that stage, it was clear that the unintended consequence of the novel's popularity was to cement the outsider status McCarthy had been so keen to shed. Although The Group brought her a vastly larger audience, its publication resulted in McCarthy being rejected by both the Vassar classmates whose social poise she envied and the highbrow artistic friends whose intellect she admired.

Was it worth it? McCarthy would no doubt have quarrelled with the premise of the question – in 1984, five years before her death from lung cancer, she was still feisty enough to declare: "To be disesteemed by people you don't have much respect for is not the worst fate." Her later works and her 26-year correspondence with the political theorist Hannah Arendt did much to restore McCarthy's reputation as one of America's leading intellectuals. But in spite of all her brilliance, or perhaps because of it, McCarthy never quite fitted into the group she wrote about. She became her own woman and that, no doubt, was just how she would have wanted it.