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Thompson was born in Paddington, London, England. Her father was the actor Eric Thompson, best known for having written and narrated The Magic Roundabout, shown on BBC children's television in the 1960s and '70s. Her mother is the Scottish actress Phyllida Law. Thompson's younger sister is actress Sophie Thompson. Thompson has spent part of her life in Scotland and has stated that she "feel[s] Scottish". Thompson went to Camden School for Girls and then studied English at Newnham College, Cambridge, where she was a member (along with fellow actors Stephen Fry, Hugh Laurie, and Tony Slattery) and vice-president of the University's theatrical club, the Footlights. Her acting talent was so impressive that agent Richard Armitage signed her to a contract while she was still 2 years away from graduation. In 1982, Emma completed her education at Cambridge with her degree. Soon after that, she came to fame with a leading role in the West End revival of the musical Me and My Girl, opposite Robert Lindsay, followed by the BBC serial drama, Fortunes of War.

Thompson's first major film role was in a romantic comedy, The Tall Guy. Her career took a more serious turn with a series of critically acclaimed performances and films, beginning with 1992's Howards End (for which she received an Oscar for Best Actress); the part of Gareth Peirce, the lawyer for the Guildford Four, in In the Name of the Father; The Remains of the Day opposite Anthony Hopkins; and as the British painter Dora Carrington in the film Carrington.

She won her next Oscar in 1996, for Best Adapted Screenplay for her screenplay adaptation of Jane Austen's Sense and Sensibility, a film in which she also played the Oscar-nominated lead role opposite Hugh Grant. She has said that she keeps both of her award statues in her downstairs bathroom, citing embarrassment at placing them in a more prominent place.

One of Thompson's earliest television appearances was in 1984 alongside Stephen Fry and Hugh Laurie as guest stars on the sitcom The Young Ones. In 1988, she starred in and wrote the eponymous Thompson comedy sketch series for BBC1; the series was not successful with audiences or critics. Described in Time Out magazine as "very clever-little-me-ish", it has never been repeated in Britain despite her Oscar successes, and Thompson has not returned to the sketch comedy field.

Thompson's recent television work has included a starring role in the 2001 HBO drama Wit, in which she played a dying cancer patient, and 2003's Angels in America, playing multiple roles, including one of the titular angels. Her Emmy Award was as a guest star in a 1997 episode of the show Ellen; in the episode, she played a fictionalised parody of herself: a closeted lesbian more concerned with the media finding out she's actually American. She also appeared in an episode of Cheers in 1992 titled "One Hugs, the Other Doesn't".

Most recently, Thompson appeared in supporting roles such as Sybill Trelawney in Harry Potter and the Prisoner of Azkaban and Harry Potter and the Order of the Phoenix. She has also appeared in the hit comedy Love Actually. The film Nanny McPhee, written by Thompson, was first released in October 2005. Thompson worked on the project for nine years, having written the screenplay and starred, alongside her mother (who has a cameo appearance). In the film Stranger Than Fiction she plays an author planning on killing her main character, Harold Crick, who turns out to be a real person. Most recently, Emma Thompson made a short uncredited cameo as a doctor introducing the cure for cancer in the form of measles in the latest film adaptation for I Am Legend.

While she was at Cambridge University, Thompson had a romantic relationship with her fellow student, actor Hugh Laurie, who was also a member of the Cambridge Footlights Revue.

Thompson married Kenneth Branagh, with whom she appeared in Fortunes of War, on 20 August 1989. They appeared together several times, in hit films such as Dead Again, Henry V and Much Ado About Nothing, but were eventually divorced in October 1995.

In 2003, Thompson married actor Greg Wise (who starred with her in Sense and Sensibility) with whom she has a daughter, Gaia Romilly, born in 1999. In 2003, Thompson and Wise informally adopted a 16-year-old Rwandan refugee named Tindyebwa Agaba. They are currently fighting his deportation back to Rwanda where it is thought all his family were killed in the genocide.

• Tutti Frutti 1987 Suzi Kettles
• Harriet Pringle Fortunes of War BAFTA winner for best actress (jointly with work on Tutti Frutti)
• Henry V 1989 Catherine of Valois
• The Tall Guy 1990 Kate Lemmon
• Dead Again 1991 Grace/Margaret Strauss
• Duchess d'antan (Claudette) Impromptu
• Howards End 1992 Margaret Schlegel
• Maggie Chester Peter's Friends
• Much Ado About Nothing 1993 Beatrice
• Miss Kenton The Remains of the Day Nominated Academy Awards for Best Actress
• Gareth Peirce In the Name of the Father Nominated Academy Awards for Best Supporting Actress
• Junior 1994 Dr. Diana Reddin
• Carrington 1995 Dora Carrington
• Elinor Dashwood Sense and Sensibility Winner, Academy Awards for Best Adapted Screenplay, Nominated Academy Awards for Best Actress
• The Winter Guest 1997 Frances
• Primary Colors 1998 Susan Stanton
• Wit 2001 Vivian Bearing
• Treasure Planet 2002 Captain Amelia
• Imagining Argentina 2003 Cecilia
• Karen Love Actually
• Nurse Emily/the Homeless Woman/the Angel America Angels in America (miniseries)
• Harry Potter and the Prisoner of Azkaban 2004 Professor Sybill Trelawney
• Nanny McPhee 2005 Nanny McPhee
• Stranger than Fiction 2006 Karen Eiffel
• Harry Potter and the Order of the Phoenix 2007 Professor Sybill Trelawney
• I Am Legend 2007 Dr. Alice Krippin Uncredited Cameo
• Brideshead Revisited 2008 Lady Marchmain
• Kate Last Chance Harvey post-production
• TBA An Education post-production
• The Boat That Rocked 2009 Charlotte post-production