Lauren Holly was born in Bristol, Pennsylvania. Her father is an English Literature professor at Hobart and William Smith Colleges, her mother Michael Ann Holly an eminent art historian who was a professor at the University of Rochester. Lauren was raised in upstate Geneva, New York, and is a 1981 graduate of Geneva High School, where she was a cheerleader. She graduated from Sarah Lawrence College in 1985 with a Bachelor of Arts degree in English Literature.

At age 23, Holly joined the cast of the iconic ABC television soap opera All My Children as Julie Chandler (1986-1989). She portrayed the comic book character Betty on television's Archie: To Riverdale and Back Again in 1990. Perhaps her best known film role came as Mary Swanson, Lloyd Christmas's love interest in the 1994 Jim Carrey comedy Dumb & Dumber. She also portrayed Linda Lee Cadwell, the wife of martial artist and actor Bruce Lee, in 1993's Dragon: The Bruce Lee Story; a doctor in Sydney Pollack's 1995 remake of Sabrina; and Lieutenant Emily Lake, the only woman aboard a submarine, in the 1996 Kelsey Grammer comedy Down Periscope.

Holly starred as small-town Deputy Sheriff Maxine Stewart in David E. Kelley's long-running TV series Picket Fences. In 2005, she joined the cast of NCIS as Director Jenny Shepard.

In March 2001, she married investment banker Francis Greco and has adopted 3 sons, Alexander, George, and Henry.