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Dunaway was born in Bascom, Florida, the daughter of Grace April (nee Smith), a homemaker, and John MacDowell Dunaway, Jr., a career army officer. She attended the University of Florida, Florida State University, and Boston University, but graduated from the University of Florida in theater. In 1962, Dunaway joined the American National Theater and Academy.

Dunaway appeared on Broadway in 1962 as the daughter of Thomas More in A Man for All Seasons. Her first screen role was in 1967 in "The Happening." In 1967 she was in Hurry Sundown, but that same year, she got the leading female role in Bonnie and Clyde (opposite Warren Beatty) which earned her an Oscar nomination. The actress also starred in 1968 with Steve McQueen in the caper film The Thomas Crown Affair (and had a small role in the 1999 remake with Pierce Brosnan). It was in the 1970s that she began to stretch her acting muscles in such films as Three Days of the Condor, Little Big Man, Chinatown, Eyes of Laura Mars and Network, for which she won the Academy Award for Best Actress as the scheming TV executive Diana Christensen. In the 1980s, although her performances did not waver, the parts grew less compelling. Dunaway would later blame Mommie Dearest (1981) for ruining her career as a leading lady. Many critics panned the movie, and audiences didn't like it either, but in later years it would become a cult classic. "I was too good at Crawford," she was often quoted as saying.[citation needed] She played an alcoholic in Barfly (opposite Mickey Rourke). In a later movie, Don Juan DeMarco (1995), Dunaway co-starred with Johnny Depp and Marlon Brando.

Dunaway won an Emmy for a 1994 role as a murderer in "It's All in the Game," an episode of the long-running mystery series Columbo. She is a three-time Oscar nominee for Bonnie and Clyde, Chinatown and Network, winning for the latter. She has won three Golden Globes, including for the television films Ellis Island (1984) and Gia (1998), and has been nominated for a Golden Globe 10 times. In 2006, Dunaway played a character named Lois O'Neill in the sixth season of the popular crime drama CSI: Crime Scene Investigation. She served as a judge on the 2005 reality show The Starlet, which sought, American Idol-style, to find the next young actress with the potential to become a major star. In the spring of 2007, the direct-to-DVD movie release of Rain, based on the novel by V. C. Andrews and starring Dunaway, was released. Dunaway has a star on the Hollywood Walk of Fame at 7021 Hollywood Boulevard which was awarded on October 2, 1996.

Romantically linked to a series of men ranging from the comedian Lenny Bruce to actor Marcello Mastroianni, Dunaway has been married twice. Her first husband, from 1974 until 1979, was Peter Wolf, the lead singer of the rock group the J. Geils Band. Her second, from 1984 until 1987, was Terry O'Neill, a British photographer; they had one child, Liam O'Neill (born 1980). In 2003, however, O'Neill revealed that his son with Dunaway was adopted, not biological, though the actress had long maintained the opposite. Dunaway is a Roman Catholic.