She graduated with a bachelor's degree in drama from Boston University in 1979. She was working as a model when director Sydney Pollack spotted her, and cast her in Tootsie (1982) as a soap opera actress. She followed this up with roles in the short-lived television series Buffalo Bill (1983-1984) and Sara (1985). She received an Academy Award as Best Supporting Actress for her role in The Accidental Tourist (1988) and a Best Actress nomination for her role in Thelma and Louise (1991).

Davis has been married four times, including her current marriage. Her ex-husbands include Jeff Goldblum (with whom she co-starred in three films, including The Fly and Earth Girls Are Easy) from 1987-90, and Renny Harlin (who directed her in Cutthroat Island) from 1993-98. She is currently married to Iranian-American Dr. Reza Jarrahy since September 1, 2001, with whom she has one daughter, Alizeh (born April 10, 2002). She had a Caesarean section on May 9, 2004, to deliver her twins, Kian William Jarrahy and Kaiis Steven Jarrahy. She is a member of MENSA.