Steenburgen was born in Newport, Arkansas, the daughter of Nell, a school-board secretary, and Maurice Steenburgen, a freight-train conductor who worked at the Missouri Pacific Railroad.[2][3][4] Steenburgen grew up in North Little Rock, Arkansas. Steenburgen married Malcolm McDowell in 1980 and they had two children together: Lily Amanda, born January 21, 1981 and Charles Malcolm born July 10, 1983, before divorcing in 1990, and has been married to actor Ted Danson since 1995.

In 2006, Steenburgen received an honorary Doctor of Humane Letters degree from Lyon College in Batesville, Arkansas.

She is a close personal friend of former First Lady, current New York Senator Hillary Clinton, and supported Clinton's 2008 Presidential campaign along with her husband.

She splits her time living in California and Martha's Vineyard.

Steenburgen moved to New York City in 1972, working at Doubleday's while studying acting at New York's Neighborhood Playhouse School of the Theatre.[5] Her break came when she was discovered by Jack Nicholson in the reception room of Paramount's New York office and was cast as the lead in his second directorial effort, the 1978 Western Goin' South.[5] She won the Academy Award for Best Supporting Actress for the 1980 film Melvin and Howard, playing the wife of a man who claims to have befriended reclusive billionaire Howard Hughes.

Steenburgen played Clara Clayton in Back to the Future Part III (1990), a role which her children, fans of the Back to the Future movies, convinced her to play. She reprised the role by providing the character's voice in the Back to the Future: The Animated Series.

She 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 husband-to-be Malcolm McDowell. In both this film and "Back to the Future" she played the love interest of a time traveler. Other notable film appearances came as an adulterous wife in What's Eating Gilbert Grape? with Johnny Depp, as the mother of Richard Nixon in the Oliver Stone biopic Nixon, and as a woman who discovers her husband is the father of a North Pole elf in the Will Ferrell holiday comedy Elf.

She also has starred in the sitcom Ink and the television miniseries of Gulliver's Travels with husband Ted Danson. She has appeared as herself alongside Danson in the HBO comedy Curb Your Enthusiasm.