She attended the High School of Performing Arts. In 1961 at the age of 18, while a prop girl at the New York Shakespeare Festival, Margolin won a pivotal Broadway stage role as Anna in Morris West's Daughter of Silence. The New York Times, reviewing the play, listed her among Leaders of "a fine cast" and said that "her Anna has a fragile, haunted dewiness."

In 1962, Margolin played her first movie role as the female lead in David and Lisa. She co-starred with Marlon Brando in 1965's Morituri and opposite Steve McQueen in the western Nevada Smith. She later played Wanda, the love interest of the lead character David Kolowitz, in the movie Enter Laughing (1967).

In Take the Money and Run (1969), she played the love interest of the bumbling thief played by Woody Allen, and in Annie Hall (1977) she played the social-climbing wife of Allen's character.

Margolin has been frequently but erroneously identified as the sister of actor Stuart Margolin and his brother, Director Arnold Margolin. However, obituaries of Margolin and her father indicate that she had no brothers, although she and Stuart Margolin acted together as man and wife in the pilot for the 1977 TV series Lanigan's Rabbi. She was close friends with producer/actress Jennifer Salt, who had co-starred with Wass in the '70s sitcom Soap.

In 1979, Margolin co-starred with Roy Scheider in Director Jonathan Demme's thriller Last Embrace.

Margolin's last film appearance was in Ghostbusters II in 1989, and her last television roles were as a killer in an episode of Murder, She Wrote ("Deadly Misunderstanding") and as a victim in Columbo: Murder in Malibu in 1990.

Margolin died of ovarian cancer at the age of 50 on December 17, 1993, in Los Angeles, California. She was cremated and her ashes were placed in an urn garden at Westwood Memorial Park in Los Angeles. She was survived by her siblings, Emily, Barbara and Laura; her husband, actor/director Ted Wass; and her two children, Julian and Matilda.