Thompson's fist significant role was as part of the cast of soap opera Motel (1968). He then took the lead role in spy drama series Spyforce (1971). He quickly moved into feature film lead roles, winning roles in many popular and acclaimed Australian films. He has also acted in television miniseries.

Thompson has emerged as a popular celebrity. He was the first nude male centrefold in Cleo magazine in 1972. He has also acted in many television commercials, including the famous advertisement for Claytons non-alcoholic mixer.

Born Thomas Hadley Pain in Manly, a suburb of Sydney, Thompson was educated at Sydney Boys High School. Thompson was 4 years old when his mother died, leaving his father, a merchant seaman, unable to care for him and his brother, David. He was sent to a boarding school by his father and was subsequently adopted by John and Pat Thompson and changed his surname afterwards. The film reviewer, Peter Thompson, is his adopted brother. Thompson's eldest son, Patrick Thompson, featured on and later hosted Seven Network's Ground Force.

Thompson featured in the first episode of the Australian version of Who Do You Think You Are?, which was televised on 13 January 2008 on SBS, with Thompson discovering that his great-grandfather was Captain Thomas Pain, and his great-great uncle was Alfred Lee, a prominent figure in Sydney society, who donated the journal of Joseph Banks, from Captain Cook's navigation to Australia in 1770s, to the Mitchell Library in Sydney.

Thompson has two sons, Patrick and Billy.

• Wake in Fright(1971)
• Petersen(1974)
• Sunday Too Far Away (1975)
• Scobie Malone(1975; title role)
• Caddie (1976)
• Mad Dog Morgan (1976)
• The Chant of Jimmie Blacksmith (1978)
• The Journalist(1979)
• Breaker Morant(1980)
• The Club(1980)
• The Earthling(1980)
• Bad Blood(1981)
• A Woman Called Golda(1982) (TV)
• The Man from Snowy River(1982)
• Merry Christmas Mr. Lawrence(1983)
• Waterfront(1984) (mini) TV Series
• Burke & Wills(1985) (as Robert O'Hara Burke)
• Flesh & Blood(1985)
• The Last Frontier(1986) (TV)
• The Riddle of the Stinson(1987) (TV)
• Ground Zero(1987)
• Trouble in Paradise (1989) (TV)
• Turtle Beach (1992)
• Wind(1992)
• The Sum of Us (1994)
• Broken Arrow (1996)
• The Thorn Birds: The Missing Years (1996) (TV)
• Midnight in the Garden of Good and Evil(1997)
• Under the Lighthouse Dancing(1997)
• My Brother Jack(2001) (TV)
• Original Sin(2001)
• South Pacific(2001) (TV)
• Yolngu Boy(2001)
• Star Wars Episode II: Attack of the Clones (2002)
• The Assassination of Richard Nixon (2004)
• Oyster Farmer (2004)
• Feed(2005)
• Man-Thing(2005)
• Ten Empty(2006)
• Bastard Boys(2007)
• December Boys (2007)
• Australia(2008)