Kidder, one of five children, was born in Yellowknife, North West Territories, the daughter of Jocelyn Mary "Jill" (née Wilson), a history Teacher, and Kendall Kidder, an explosives expert and Engineer. Kidder also spent time growing up in Labrador City, Newfoundland and Labrador. Her mother was from British Columbia, Canada, and her father was from New Mexico, United States. She is of Welsh and English descent. Kidder was born in Yellowknife because of her father's job, which required the family to live in remote locations. Her father was manager of the Yellowknife Telephone Company from 1948 to 1951. Kidder recalled her childhood in northern Canada, saying, "We didn't have movies in this little mining town. When I was 12 my mom took me to New York and I saw Bye Bye Birdie, with people singing and dancing, and that was it. I knew I had to go far away. I was clueless, but I [have done] okay."

Kidder attended multiple schools in her youth, and graduated from Havergal College, a boarding school in Toronto, in 1966. She has a sister, Annie, and three brothers, John, Michael and Peter. Kidder's niece, Janet Kidder, is also an Actress.

Kidder made her film debut in a 49-minute film titled The Best Damn Fiddler from Calabogie to Kaladar (1968), a drama set in a Canadian logging community, which was produced by the Challenge for Change. Her first major feature was the 1969 American film Gaily, Gaily, a comedy starring Beau Bridges. She appeared in a number of TV drama series for the CBC, including guest appearances on Wojeck, Adventures in Rainbow Country, and a semi-regular role as a young reporter on McQueen, and as a panelist on Mantrap which featured discussions centered on a feminist perspective. During the 1971–72 season, she co-starred as barmaid Ruth in Nichols, a James Garner western, which aired 22 episodes on NBC.

After moving to Los Angeles, Kidder was cast opposite Gene Wilder in Quackser Fortune Has a Cousin in the Bronx (1970) as an exchange student in Ireland who becomes the love interest of a poor horse manure collector in Dublin whom she almost runs over with her car. After filming in Ireland, Kidder relocated to New York City to further study acting. A year later, she returned to California, and was cast in the Brian De Palma cult classic Sisters (1973), which gained notoriety for both Director and Kidder, who as leading lady, portrayed conjoined twins. Kidder had been in a relationship with De Palma at the time, and had been roommates with co-star Jennifer Salt in Los Angeles. She then starred in the slasher film Black Christmas in 1974, for which she won a Canadian Film Award for Best Actress; followed by a role as a prostitute in the Terrence Malick-scripted The Gravy Train (1974). She received another Canadian Film Award for Best Actress for her performance in the war drama A Quiet Day in Belfast (1974).

She then appeared playing Siamese twins in Brian De Palma's cult thriller Sisters (1973); in the slasher film Black Christmas (1974); and the drama The Great Waldo Pepper (1975), opposite Robert Redford. Her performance as Kathy Lutz in the blockbuster horror film The Amityville Horror (1979) gained her further mainstream exposure.

In 1975, Kidder was cast in a lead role in The Great Waldo Pepper opposite Robert Redford, she also appeared in The Reincarnation of Peter Proud and 92 in the Shade (1975) with Peter Fonda, all of which established her as a commercially viable leading lady. Kidder famously married the Director of 92 in the Shade, Thomas McGuane. She appeared on the March 9, 1975 edition of The American Sportsman, learning how to hang glide with her providing the narration and a remote microphone recording her reactions in flight; the segment concluded with Kidder doing solos soaring amid the Wyoming Rockies.

Kidder dated former Canadian prime minister Pierre Trudeau, Directors Brian De Palma, writer/director Tom Mankiewicz and Steven Spielberg, and actor/comedian Richard Pryor. She has been married and divorced three times. Kidder's first husband was American Novelist Thomas McGuane, with whom she had her only child, daughter Maggie McGuane, born in 1976. She was married to actor John Heard in 1979 for only six days, and was married to French film Director Philippe de Broca from 1983 to 1984. Since her divorce from De Broca, she has said that she prefers the companionship of her dogs. Kidder has two grandchildren from her daughter Maggie's marriage to Novelist Walter Kirn.

She maintained a close friendship with her Superman co-star Christopher Reeve, which lasted from 1978 until his death in 2004. "When you're strapped to someone hanging from the ceiling for months and months, you get pretty darned close," Kidder told CBS. "He was such a huge part of my life... He was complicated, very smart, really smart, and he knew he'd done something meaningful. He was very aware of that and very happy with that role."

Kidder's performance as Kathy Lutz in the 1979 summer release of The Amityville Horror further cemented her status as one of Hollywood's leading ladies. Though it received mixed reviews from critics, The Amityville Horror was a major commercial success, grossing over $86 million in the United States. Janet Maslin of The New York Times, though giving the film a mixed review, said Kidder "stubbornly remains the bright-eyed life of the party [in the film]." In retrospect, Kidder called the film "a piece of shit." The same year, Kidder hosted an episode of the American Sketch comedy TV show Saturday Night Live.

Kidder continued to work in film throughout the 1980s, appearing in Paul Mazursky's Willie & Phil and Some Kind of Hero. Her performance in 1981's Heartaches generated critical acclaim and Oscar buzz. As court stenographer-cum-private eye Mickey Raymond, the PG rating that 1983's Trenchcoat received led Disney to launch Touchstone Pictures. She appeared opposite James Garner in the controversial Hollywood crime drama The Glitter Dome (1984). In 1985, she toplined Little Treasure for Columbia Tri-Star with co-stars Ted Danson and Burt Lancaster, where she played a distraught stripper looking for her bank robber-father's buried fortune. In 1986 she was selected as the English narrator for the Japanese animated series The Wonderful Wizard of Oz.

A 1982 stage performance of Bus Stop starring Kidder as Cherie and Tim Matheson as Bo, was broadcast on HBO. In 1983, she produced and starred as Eliza Doolittle in a version of Pygmalion with Peter O'Toole for Showtime. She produced and starred in the French-Canadian period television film Louisiana (1984) as a plantation owner in the American South who returns from Paris to find her estate and holdings have been lost. Body of Evidence (1988), a CBS Movie of the Week, cast Kidder as nurse who is suspicious that her medical pathologist second husband is a serial killer. In 1994, Kidder played the bartender at the Broken Skull Tavern in Under a Killing Moon, an IBM PC adventure game. In 1994 she took time to appear in the Disney Channel movie WindRunner, with Russell Means and Jason Wiles. She made uncredited cameo appearances in Maverick (1994) and Delirious (1991).

She actively supported Jesse Jackson's bid for the Democratic nomination in the 1984 U.S. presidential election. In the early 1990s, during the first Gulf War, Kidder was branded a "Baghdad Betty" and subjected to abuse for her remarks questioning the war. In a piece called "Confessions of 'Baghdad Betty'", styled as a letter to her mother and printed in The Nation, Kidder responded by explaining and defending her statements.

Kidder was in a car crash in December 1990, after which she was unable to work for two years, causing her financial problems.

Kidder has been diagnosed with bipolar disorder, which was the cause of a widely publicized manic episode that she experienced in April 1996. At the time, Kidder had been working on an autobiography, when her laptop computer was infected with a virus, which caused it to crash and her to lose three years' worth of drafts. Kidder flew to Los Angeles to have the computer examined by a data retrieval company, who ultimately were unable to retrieve the files. Kidder then entered a manic state and disappeared for four days. She was found in a backyard by a homeowner and was taken by the Los Angeles Police Department to Olive View Medical Center in a distressed state, the caps on her teeth having been knocked out during a purported rape attempt. She was later placed in psychiatric care. In 2007, Kidder said that she had not had a manic episode in 11 years, and has credited her well-being to orthomolecular Medicine.

In 2000, Kidder played Eileen Canboro in Apocalypse III: Tribulation, a Christian film dealing with Christian eschatology and the Rapture. Kidder stated afterwards that she did not realize until she was on the set that the movie was serious. Also that year she appeared in three episodes of Peter Benchley's Amazon (1999 TV series), playing a striking role as an insane Canadian woman bent on domination of all the local tribes. In 2001, she played the abusive mother of a serial killer in "Pique", an episode of Law & Order: Special Victims Unit. In 2002, she appeared alongside Crispin Glover and Vanessa Redgrave in the film adaptation of Crime and Punishment.

Kidder appeared on Broadway in The Vagina Monologues in December 2002, and toured with the show for two years. After this, she appeared on Robson Arms, a Canadian sitcom set in an apartment block in Vancouver's west end. She played a quirky neighbor of the main cast members. She also had a cameo in Rich Hall's Election Special on BBC Four. In 2006, Kidder played Jenny Schecter's mother Sandy Ziskin on The L Word, a repressed Jewish woman coming to terms with her daughter's sexuality. In 2007, Kidder began appearing on the television series Brothers and Sisters, playing Emily Craft. In 2004, Kidder briefly returned to the Superman franchise in two episodes of the television series Smallville, as Dr. Bridgette Crosby, an emissary of Dr. Swann (played by her Superman co-star, Christopher Reeve).

Kidder became a United States citizen on August 17, 2005, in Butte, Montana; she lives in Livingston, Montana. She said that she decided to become an American citizen to participate in the voting process, to continue her protests against U.S. intervention in Iraq, and to be free of worries about being deported.

She portrayed an embattled guidance counselor in the 2008 gay-themed mystery film On the Other Hand, Death, as well as a supporting role as Laurie Strode's therapist, in Rob Zombie's Halloween II (2009). In an interview with the LGBT publication The Advocate, Kidder discussed her later career choices, saying: "I’m not choosy at all! I’ll do practically anything. I’m the biggest whore on the block. I live in a little town in Montana, and you have to drag me out of here to get to L.A., so I’m not readily available. But unless it’s something sexist or cruel, I just love to work. I’ve done all sorts of things, but you just haven’t seen them because they’re often very bad and shown at 4 in the morning."

She has contributed articles to CounterPunch, a left-wing magazine, beginning in 2009. In an article expressing her reaction to the 2016 Democratic National Convention, she wrote, "I am not an American tonight... I reject the words I voiced at my citizenship ceremony."

In addition to her campaigning in the United States, Kidder has expressed support for liberal causes in Canada. In 2011, she supported her brother, John Kidder, in Vancouver, who was running to be a member of Canada's Parliament. :

On August 22, 2015, Kidder was named the host of a dinner event by the Yellowstone County Democrats in Billings, Montana called "Billings for Bernie" in support of Bernie Sanders' presidential primary bid.