Banks met her husband, Max Handelman, a sportswriter and Producer from Portland, Oregon, on her first day of college on September 6, 1992. They were married in 2003. The couple have two sons. She and her husband had their first child, Felix, who was born through a surrogate in March 2011. In November 2012, Banks announced the birth of another son, Magnus Mitchell, also by surrogate.

Banks changed her name to avoid confusion with Actress Elizabeth Mitchell. After auditioning in New York, she was offered a role on the soap opera Santa Barbara. Taking the role would have required her to quit her education at the American Conservatory Theatre, and Banks ultimately decided to forgo the offer due to having taken out student loans to complete her degree. She made her acting debut in the 1998 independent film Surrender Dorothy, as Elizabeth Casey, and appeared in various films over the next seven years including Guy Ritchie's Swept Away before gaining more prominent widespread exposure through the 2005 comedy film The 40-Year-Old Virgin.

In August 2005, at the Williamstown Theatre Festival, Banks starred in william Inge's Bus Stop as Cherie, the sexy blonde aspiring nightclub singer. Jeffrey Borak wrote that Banks' portrayal was acted "with poise, clarity and a shrewd feel for Cherie's complexities. Her performance is all of a piece and in harmony, stylistically, with the performances around her..." In 2005, she appeared on the series Stella, and in May 2006, she had a role in the season five finale of the NBC sitcom Scrubs as Dr. Kim Briggs, the love interest of J.D. (Zach Braff). The character appeared throughout seasons six, seven, and eight as a recurring guest star.

In 2006, Banks appeared in the American football drama film Invincible, in which she played Mark Wahlberg's love interest. Later, she and co-star Wahlberg were nominated for the "Best Kiss" award at the MTV Movie Awards. That same year, she landed the starring role in the comedy-horror film Slither.

In 2007, Banks played the female lead in the comedy film Meet Bill, alongside Aaron Eckhart and Jessica Alba. That same year, she had a small role in the Christmas comedy film Fred Claus, co-starring Vince Vaughn and Paul Giamatti as Santa's little helper, Charlyne. In 2008, she played the ex-wife and mother of the daughter of Ryan Reynolds lead in the comedy film Definitely, Maybe, alongside Isla Fisher and Ryan Reynolds, starred with Seth Rogen as the eponymous female lead in the Kevin Smith comedy Zack and Miri Make a Porno, and played United States First Lady Laura Bush in W., Oliver Stone's biopic of George W. Bush.

In 2009, Banks appeared in the horror film The Uninvited, a remake of the Korean film A Tale of Two Sisters. The film was about an intrusive stepmother who makes life miserable for the teen daughters of her new husband. Banks based her character, Rachel, on Rebecca De Mornay's character in The Hand That Rocks the Cradle. "It was very important to me that every line reading I gave could be interpreted two ways," says Banks of her role, "So that when you go back through the movie you can see that".

Banks was cast as a love interest for Jack Donaghy (Alec Baldwin) in the fourth season of the Emmy Award-winning sitcom 30 Rock. Intended to appear in four episodes in 2010, Banks went on to become a recurring character with 13 appearances by the end of the fifth season, including her marriage in the episode Mrs. Donaghy. Her performance in season five earned her a nomination for Primetime Emmy Award for Outstanding Guest Actress in a Comedy Series for the 63rd Primetime Emmy Awards.

In 2012 Banks also starred in the film What to Expect When You're Expecting alongside Jennifer Lopez. Banks appeared in the movie The Hunger Games (2012), playing Effie Trinket, a woman from "The Capitol" who escorts the District 12 tributes to the Hunger Games. She reprised the role in the films The Hunger Games: Catching Fire (2013), The Hunger Games: Mockingjay – Part 1 (2014), and The Hunger Games: Mockingjay – Part 2 (2015). Banks co-starred in the 2014 movie Every Secret Thing, playing Detective Nancy Porter investigating the disappearance of a young child with similarities to a case she had previously been involved with.

Banks went through parts of conversion to Judaism, her husband's faith, and studied with rabbis. In 2013, speaking of her religion, she stated that she practices Judaism, though "I did not have my mikveh, so technically I'm not converted," but that she has "been essentially a Jew for like 15 years," adding "Frankly, because I'm already doing everything [practicing religious rituals], I feel like I'm as Jewish as I'm ever going to be."

In 2014, Banks was recognized by Elle Magazine during The Women in Hollywood Awards, honoring women for their outstanding achievements in film, spanning all aspects of the motion picture industry, including acting, directing, and producing.

In 2015, she was named as a member of the Jury for the Main Competition at the 2015 Venice Film Festival. The festival is chaired by Alfonso Cuarón. Also in 2015, Banks became a spokeswoman for Realtor.com in their series of television commercials. As of mid-February 2016, Banks became the commercial face of Old Navy. She also played space alien Rita Repulsa in the 2017 Power Rangers reboot film.

Banks was a vocal supporter of Hillary Clinton's 2016 presidential campaign, and was involved in a rendition of Rachel Platten's single "Fight Song" with other celebrities at the Democratic National Convention.

As of August 2017, Box Office Mojo ranked Banks as the 41st-highest grossing actor of all time, and the fifth-highest grossing Actress.