Harden, one of five children, was born in La Jolla, California, the daughter of Texas natives Beverly (née Bushfield), a housewife, and Thad Harold Harden (1932–2002), who was an officer in the United States Navy. One of Harden's brothers is named Thaddeus, as is her former husband. Harden's family frequently moved because of her father's job, living in Japan, Germany, Greece, California, and Maryland. She graduated from Surrattsville High School in Clinton, Maryland, in 1976, the University of Texas at Austin with a BA in theatre, and the Graduate Acting Program at New York University's Tisch School of the Arts with a Master of Fine Arts.

Harden's first film role was in a 1979 student-produced movie at the University of Texas. Throughout the 1980s, she appeared in several television programs, including Simon & Simon, Kojak, and CBS Summer Playhouse. She appeared in The Imagemaker (1986), her first movie screen role, in which she played a stage manager. She appeared in the Coen brothers' Miller's Crossing (1990), a 1930s mobster drama in which she first gained wide exposure. Even so, at the time, living in New York City, she had to go back to doing catering jobs "because I didn't have any money".

In 1992, Harden played Actress Ava Gardner alongside Philip Casnoff as Frank Sinatra in the made for TV miniseries Sinatra. Throughout the 1990s, she continued to appear in films and television. Notable film roles include the Disney sci-fi comedy Flubber (1997), a popular hit in which she co-starred with Robin Williams; the supernatural drama Meet Joe Black (1998), playing the under-appreciated daughter of a tycoon (Anthony Hopkins, co-starring Brad Pitt); Labor of Love (1998), a Lifetime television movie in which she starred with David Marshall Grant; and Space Cowboys (2000), an all-star adventure-drama about aging astronauts.

In 1993, Harden debuted on Broadway in the role of Harper Pitt (and others) in Tony Kushner's Angels in America. The role earned her critical acclaim, and she received a Tony Award nomination (Best Featured Actress in a Play). The winner in that category was Debra Monk in Redwood Curtain.

Harden was awarded the 2000 Academy Award for Best Supporting Actress for her portrayal of Painter Lee Krasner in Pollock (2000). In 2003, she was again nominated in the same category for Mystic River.

In 2002, she received the Excellence in Acting award at the Provincetown International Film Festival.

On December 14, 2003, her nephew Sander Waring Harden and niece Audrey Gay Harden died along with their mother, Rebecca Harden, as a result of a fire in their Queens, New York, apartment. Rebecca Harden was, at the time, divorced from Marcia Gay's brother, the children's father, Thaddeus Harden.

Harden married Thaddaeus Scheel, a prop master, with whom she worked on The Spitfire Grill in 1996. Harden and Scheel have three children: a daughter, Eulala Grace Scheel (September 1998), and twins Julitta Dee Scheel and Hudson Scheel Harden (April 22, 2004). In February 2012, Harden filed for divorce from Scheel.

She is a practitioner of ikebana, the art of Japanese flower arrangement, which her mother learned while they lived in Japan. She gave a brief demonstration in 2007 at The Martha Stewart Show and presented some works of her family as well. In May 2018, her autobiographical book The Seasons of My Mother: A Memoir of Love, Family, and Flowers will be published. The book details the story and bond of mother and daughter throughout time and how they are dealing with the largest struggle yet, her mother's Alzheimer's disease. Marcia Gay Harden created works of ikebana specifically for this book to illustrate the different seasons of her mother's life.

In 2009, Harden co-starred with Ellen Page and Drew Barrymore in Whip It, which proved a critical success. Harden also played in the comedy The Maiden Heist (2009) with Christopher Walken and Morgan Freeman. It was also in this year that Harden returned to Broadway in Yasmina Reza's God of Carnage, where she co-starred with James Gandolfini, Hope Davis, and Jeff Daniels. All three actors were nominated for the Tony Award, and on June 8, Harden won Best Actress in a Play.

On May 22, 2010, Harden delivered the 127th Spring Commencement Address at her alma mater, the University of Texas at Austin. She had previously spoken at graduation ceremonies for UT's College of Fine Arts in 2001.

In 2013, Harden reunited with her former Broadway co-star Jeff Daniels as a new cast member on HBO's series The Newsroom. From 2015 to 2018, she played Christian Grey's mother, Grace Trevelyan Grey, in the Fifty Shades film series. Also in 2015, she began a starring role in the TV series Code Black.