Born Blanche Garfein in New York City, she is the daughter of Actress Carroll Baker and Director Jack Garfein. Her father is a Czech Jew, who survived the Holocaust; and her mother converted to Judaism. She also has a younger brother, Herschel Garfein. She spent her early life in Italy, where her mother had established a film career after leaving Hollywood in the mid-1960s. Baker attended Wellesley College from 1974 to 1976, and later studied acting at the Herbert Berghof Studio, the Lee Strasberg Theatre Institute, and the American School in London.

Blanche Baker made her television debut playing the character Anna Weiss in the miniseries Holocaust. (Her father Jack Garfein was a Holocaust survivor who had been imprisoned in Auschwitz. She won the Emmy Award for Outstanding Single Performance by a Supporting Actress in a Comedy or Drama Series in 1978 for her performance.

Baker made her movie debut in The Seduction of Joe Tynan (1979). Other film appearances include Sixteen Candles (1984), Cold Feet (1984) and Taking Chance (2009).

In 1980-81, she originated the lead role in Edward Albee's stage adaptation of Vladimir Nabokov's novel Lolita. During out-of-town tryouts and in New York, the play was picketed by feminists, including Women Against Pornography, who were outraged by the theme of pedophilia.

People Magazine called Albee's Lolita "Broadway's Bomb of the Year" in an April 16, 1981, story. Baker was the real subject of the article, and People Writer Mark Donovan said "the critics were almost unanimous on one point: Blanche Baker was an ingenue whose time had come," citing reviews of critics that had called her "breathtaking" and "beguiling."

Baker originated the role of Shelby in the first production of Steel Magnolias Off-Broadway in 1987.