Steenburgen was born in Newport, Arkansas, the daughter of Nellie Mae (née Wall), a school-board secretary, and Maurice Steenburgen, a freight-train conductor who worked at the Missouri Pacific Railroad.
Steenburgen married actor Malcolm McDowell in 1980 and they had two children together, Lilly and Charles. Steenburgen and McDowell divorced in 1990.
On October 7, 1995, Steenburgen married actor Ted Danson, whom she met on the set of the movie Pontiac Moon in 1993, and became the stepmother to Danson's daughters Kate and Alexis from his previous marriage to producer Cassandra Coates. In September 2005, she and Danson gave a guest lecture for students at the Clinton School of Public Service where they discussed their roles in public service as well as the foundations and causes in which they are involved. An alumna of Hendrix College, Steenburgen received an honorary doctorate from the institution in 1989. In 2006, Steenburgen received an honorary Doctor of Humane Letters degree from Lyon College in Batesville, Arkansas. She resides in the Los Angeles area with her family.
She is a close friend of former Senator and Secretary of State Hillary Clinton, and supported Clinton's 2008 Presidential campaign along with Danson.
In January 2012, Steenburgen became a grandmother when her daughter Lilly gave birth to a daughter.
Steenburgen's big break came when she was discovered by Jack Nicholson in the reception room of Paramount's New York office and was cast as the female lead in his second directorial effort, the 1978 Western Goin' South.
Steenburgen had a leading role in the 1979 film Time After Time as a modern woman who falls in love with author H. G. Wells, played by her first husband-to-be Malcolm McDowell.
In only her third film, she won the Academy Award for Best Supporting Actress for the 1980 film Melvin and Howard, playing Lynda Dummar, the wife of Melvin Dummar, then a trucker and aspiring singer, who claimed to have befriended reclusive eccentric Howard Hughes. Another notable film appearance came in the well-received 1983 film Cross Creek, in which she played Marjorie Kinnan Rawlings, author of The Yearling.
In Back to the Future Part III (1990), Steenburgen played Clara Clayton, a school teacher who falls in love with Doc Brown, played by Christopher Lloyd. She was persuaded to play the role by her children, as well as by fans of the Back to the Future films, and reprised the role by providing the character's voice in Back to the Future: The Animated Series.
Other performances have been: in What's Eating Gilbert Grape (1993), as a woman who is having an affair with the title character (played by Johnny Depp); the role of Hannah Nixon in the Oliver Stone biopic, Nixon (1995); and in the Will Ferrell 2003 comedy Elf, as a woman who discovers that her husband is the father of one of Santa's elves.
In recent years, she has been in the comedy films, Step Brothers (2008), starring Will Ferrell, playing the mother of Ferrell's character; Four Christmases (2008) opposite Vince Vaughn and Reese Witherspoon; and The Proposal (2009) opposite Sandra Bullock and Ryan Reynolds.
Dirty Girl, which features Steenburgen along with Juno Temple, Milla Jovovich and William H. Macy, premiered at the Toronto Film Festival on September 12, 2010. She also appeared in the critically acclaimed film The Help (2011), starring alongside Emma Stone, Viola Davis and Bryce Dallas Howard. And she had a featured role as a lounge singer who is the romantic interest in a love triangle in the 2013 comedy Last Vegas.
In television, Steenburgen starred in the sitcom Ink (1996) with her husband, Ted Danson, and co-starred in the television miniseries Gulliver's Travels (1996) with Danson. She appeared as herself, alongside Danson, in the HBO comedy Curb Your Enthusiasm. She played the mother of the title character in the CBS drama series Joan of Arcadia. In 2011, she made guest appearances in Bored to Death, again alongside Danson. Steenburgen recurred on the NBC comedy 30 Rock in 2012 and 2013, playing the role of Diana Jessup. She starred in the 2011 FX pilot, Outlaw Country, but FX decided against making a series.