Gershon went to Collier Street Elementary School and Woodland Hills Academy (formerly known as Parkman Junior High). She attended Beverly Hills High School and started acting at the age of 14. After graduating from high school in 1980, Gershon moved to Boston to attend Emerson College. She transferred to New York University, and graduated with a BFA in drama and psychology/philosophy in 1983.

She had a cameo role in The Cars 1984 video "Hello Again" alongside Andy Warhol. She appeared in Lenny Kravitz's music video entitled "Again".

She portrayed Nancy Sinatra in the made-for-TV biopic Sinatra, in 1992.

In 1996 she played Corky, an ex-con who gets mixed up in an affair with Violet (played by Jennifer Tilly), in the mobster flick Bound. In 1997, she co-starred with John Travolta and Nicolas Cage in Face/Off.

Gershon is regarded as a gay icon for her roles in movies such as Bound (in which she played a butch lesbian), Prey for Rock & Roll, and Showgirls (in which she played a bisexual stripper, and which is regarded as a camp classic). She was ranked #23 on the Maxim Hot 100 Women of 2004.

Gershon played Jew's harp on "I Can't Decide", a song on the Scissor Sisters 2006 release Ta-Dah. She also played Jew's harp on the song "I Do It For Your Love", Paul Simon's collaboration with Herbie Hancock on his album Possibilities, in a duo with Bassist Christian McBride on the song "Chitlins and Gefiltefish", on McBride's 2011 album Conversations with Christian, and on "Maria" from her album In Search of Cleo.

On television, she has recurring roles on HBO's Curb Your Enthusiasm (as a Hasidic dry cleaner), Rescue Me, and the U.S. dramedy series Ugly Betty (as Italian cosmetics mogul Fabia, the rival of Wilhelmina Slater). She also has served as the voiceover for Major League Baseball's "I Live For This" promotional campaign. She has also played the voice of Catwoman in the 2007 animated series The Batman.

A 2008 Vanity Fair article linked her romantically with former President Bill Clinton. She denied the connection, saying on the June 9 episode of the TV show Live with Regis and Kelly "It is such a crazy, outrageous lie... I met him three times at events. [These rumors] disturbed me on so many levels."

She has appeared on Broadway three times, as Sally Bowles in the revival of Cabaret, in the revival of the sex farce Boeing-Boeing, and played Rosie Alvarez in the 2010 Broadway revival of Bye Bye Birdie at the Roundabout Theatre Company.

In 2011, she appeared as a recurring character in the HBO series How to Make It in America. Her portrayal of Donatella Versace in Lifetime's House of Versace earned her praise from fashion critic Cathy Horyn.

Gershon's first book written for adults, In Search of Cleo: How I Found My Pussy and Lost My Mind, is the true story of the hunt for her runaway cat and was released on October 11, 2012.

On December 19, 2014, it was announced that Gershon would guest star in Glee's sixth and final season as Pam, the mother of Blaine Anderson (Darren Criss).

In 2017, Gershon began recurring on Brooklyn Nine-Nine as the villainous Lt. Melanie Hawkins.