Like fellow Irish actor Colin Farrell, he attended the Gaiety School of Acting in Dublin where he made his non-professional stage debut in the school's production of Tear Up The Black Sail. His professional stage debut was in 1994's True Lines, directed by John Crowley, who later directed Intermission. True Lines was first performed in Kilkenny; it later moved to the Dublin Theatre Festival and on to Bush Theatre in London. Townsend's early movie roles were in Irish short films such as "Godsuit" and "Summertime". His first part in a feature length film was Trojan Eddie, a 1996 UK/Irish co-production. In 1997 he landed a lead role in the British film Shooting Fish. After his appearance as the outrageous seducer in the title role of About Adam, he started to be noticed in the United States by critics and the public alike. In mid-2000, he briefly returned to the London stage in the Tennessee Williams play Orpheus Descending, starring as Val Xavier, alongside Helen Mirren as Lady Torrance. In recent years he has appeared in a number of big budget films including Queen of the Damned, opposite Aaliyah, as the vampire Lestat de Lioncourt; and The League of Extraordinary Gentlemen as Dorian Gray. Townsend was hired to play the part of Aragorn in Peter Jackson's The Lord of the Rings film trilogy, but was released after production had started. Viggo Mortensen took over the role with two days notice. In the DVD commentary for The Fellowship of the Ring, writer Fran Walsh said that she and Peter Jackson realized that they had cast Aragorn "too young". In 2005 Townsend starred alongside Gabrielle Union in Night Stalker, the remake of the 1974 ABC TV series Kolchak: The Night Stalker. He played the part of Carl Kolchak, an investigative reporter looking into his wife's murder. Night Stalker was abruptly cancelled by ABC after six episodes due to bad viewing figures. Again, he was cited as "too young" by many reviewers and fans of the original series comparing him to Darren McGavin in the original series. The same year Townsend played a notable guest starring role on NBC's Will and Grace as the pansexual pastry chef of Karen Walker who seduces her, Will Truman, and later Karen's maid Rosario. He also made an uncredited cameo in 2005's live-action Æon Flux film. Townsend recently starred alongside Ryan Reynolds in the comedy Chaos Theory.

Townsend's father, Peter, was a golfer, who played in the 1969 and 1971 Ryder Cups. Townsend has dated actress Charlize Theron since meeting her on the set of 2002's Trapped. The couple live together in Los Angeles.