Schell's brother, Paul Rudolf (born 1940), now known as Paul von Schell, has acted in a number of German-language productions. A younger brother, Peter (1941–68), died young. Through a German great-grandfather, Schell is related to Louis XIV of France (1638–1715), Philip II, Duke of Orléans (1674–1723), Regent of France and Francis I, Holy Roman Emperor (1708–65).

Fleeing Hungary in advance of the Russians and Communism, the family lived in poverty until 1948, finding asylum in Austria: first in Vienna, then in Salzburg. In 1950, the family emigrated to the United States, where Schell's father acquired American citizenship.

Schell entered a convent school in the New York City borough of Staten Island. In 1957, her father joined Radio Free Europe and the family moved to Munich, Germany, where Schell developed an interest in acting and attended the Otto Falckenberg School of the Performing Arts.

Under the name Katherina von Schell, she made her film debut in 1964 as the title character in the little-known German-language film Lana: Queen of the Amazons (German: Lana – Königin der Amazonen). In 1969, she appeared as Bond girl Nancy in the George Lazenby James Bond film On Her Majesty's Secret Service (credited as Catherina von Schell), and as Clementine Taplin in the science-fiction thriller Moon Zero Two. In 1972, she appeared for the first time under the name Catherine Schell in Madame Sin, an American television film starring Bette Davis.

Schell's first TV credit was Till Eulenspiegel (1967), a West German comedy in which she played Nele and was billed as Katherina von Schell.

While filming Amsterdam Affair in 1968, Schell met and married her first husband, British actor william Marlowe (1930–2003), and moved to London. The marriage ended in divorce in 1977. Schell married Director Bill Hays (1938–2006) in 1982. In 1984, they worked together for the first time as husband and wife on a TV production of Ivan Turgenev's play A Month in the Country.

In 1975, she appeared opposite Peter Sellers in the comedy The Return of the Pink Panther as Lady Claudine Lytton. It is frequently claimed that her tendency to break into uncontrollable laughter at Sellers' antics as Inspector Clouseau spoiled many takes. The final print of the film repeatedly shows Schell attempting to stifle laughter at Sellers' behaviour, both at the Lytton residence and during the nightclub bar scene. Although these scenes are frequently offered as classic examples of corpsing, Schell has maintained in interviews that she considered it in character for Lady Lytton to be amused by Clouseau, whom she does not see as a serious threat (made clear during her banter with her on-screen husband at the film's climax in the character's hotel room).

Schell's career continued into the mid-1990s, after which she retired from acting and opened Chambre d'Hôtes Valentin, a small guesthouse in Bonneval, Haute-Loire, France, which would become a popular destination for fans of Space: 1999. She reportedly sold the inn after the death of her second husband in 2006.

Schell contributed a foreword to the Space: 1999 novel Born for Adversity, written by David McIntee and published by Powys Media in 2010.

Schell made her first convention appearance MainMission:2000, a celebration of the 25th anniversary of Space: 1999 held in New York City. To date, she has appeared at only one other convention, mainly due to her second husband's declining health.