McTeer made her professional stage debut in 1984, and was nominated for the 1986 Olivier Award for Best Newcomer for The Grace of Mary Traverse. Other theatre roles include Yelena in Uncle Vanya (London), Veronique in God of Carnage (London & New York) and the title role in Mary Stuart (London & New York), which won her a second Drama Desk Award in 2009. On television, she starred in the title role of Lynda La Plante's The Governor (1995–96), received an Emmy Award nomination for Into the Storm (2009) and a Golden Globe nomination for The White Queen (2013).

McTeer's television work includes the BBC production Portrait of a Marriage, an adaptation of Nigel Nicolson's biography of the same name in which she played Vita Sackville-West, and the popular ITV series The Governor written by Lynda La Plante. She made her screen debut in Half Moon Street, a 1986 film based on a novel by Paul Theroux. In 1991, she appeared in Catherine Cookson's The Black Velvet Gown, with Bob Peck and Geraldine Somerville; this won the International Emmy award for best drama. She appeared in the 1992 film version of Wuthering Heights (co-starring Juliette Binoche and Ralph Fiennes) and the 1995 film Carrington (which starred Emma Thompson and Jonathan Pryce) as Vanessa Bell.

In 1996, McTeer garnered critical acclaim – and both the Laurence Olivier Theatre Award and Critics' Circle Theatre Award – for her performance as Nora in a West End production of Henrik Ibsen's A Doll's House. The following year, the production transferred to Broadway, and McTeer received a Tony Award, a Theatre World Award, and the Drama Desk Award for Best Actress in a Play.

During the show's run, McTeer was interviewed by Charlie Rose on his PBS talk show, where she was seen by American filmmaker Gavin O'Connor, who, at the time, was working on a screenplay about a single mother's cross-country wanderings with her pre-teenage daughter. He was determined that she star in the film. When prospective backers balked at her relative anonymity in the US, he produced the film himself. Tumbleweeds proved to be a 1999 Sundance Film Festival favourite, and McTeer's performance won her a Golden Globe as Best Actress and Academy Award and Screen Actors Guild nominations in the same category.

McTeer played Mary, Queen of Scots in Mary Stuart, a play by Friedrich Schiller in a new version by Peter Oswald, directed by Phyllida Lloyd. She acted opposite Harriet Walter as Queen Elizabeth I in London's West End in 2005, a role she reprised in the 2009 Broadway transfer. McTeer received a Tony Award nomination for her role in Mary Stuart, and won the Drama Desk Award for Outstanding Actress in a Play.

McTeer was appointed an Officer of the Order of the British Empire in the 2008 Birthday Honours.

In 2009, she portrayed Clementine Churchill in the HBO feature, Into the Storm, about Sir Winston Churchill's years as Britain's leader during World War II.

In 2011, McTeer starred alongside Glenn Close in Albert Nobbs and with Daniel Radcliffe and Ciarán Hinds in The Woman in Black (based on the 1983 novel of the same name). Her role as Hubert Page in Albert Nobbs won McTeer critical acclaim and numerous award nominations, including an Academy Award nomination for Best Supporting Actress. It was announced in November 2011 that McTeer had joined the cast of Damages (in the character of Kate Franklin) for its fifth and final season, reuniting her with her Albert Nobbs co-star Glenn Close. This was her first American television series. She played American Novelist Mary McCarthy in Margarethe von Trotta's film Hannah Arendt.

She also appeared opposite Glenn Close in the final season of the drama series Damages (2012). Her other film roles include Half Moon Street (1986), Hawks (1988), Wuthering Heights (1992), Carrington (1995), Velvet Goldmine (1998), Songcatcher (2000), The Intended (2002), As You Like It (2006), Tideland (2005), Cat Run (2011), Woman in Black (2012), Maleficent (2014), The Divergent Series (2015–16) and Me Before You (2016).

On 29 July 2013, it was announced that McTeer had joined the cast of The Honourable Woman, a BBC spy-thriller miniseries starring Maggie Gyllenhaal. In 2015, McTeer starred as Commander Kim Guziewicz in CBS comedy-drama Battle Creek, and is currently filming The Kaiser's Last Kiss (in which she is due to portray Princess Hermine Reuss of Greiz), set for a 2016 release.

In 2016, McTeer played Petruchio in the New York Public Theater Shakespeare in the Park all-female production of The Taming of the Shrew, directed again by Phyllida Lloyd. She co-starred alongside Liev Schreiber in "Les Liaisons Dangereuses" on Broadway, with McTeer cast as Marquise de Merteuil. The play ran from October 2016 to January 2017.

In 2018, she played Alisa Jones in the Marvel Television and Netflix production of Jessica Jones.