After graduating from Esquimalt High School in Esquimalt, British Columbia, Tilly left home and moved to the United States to pursue a career as a professional Dancer. In New York City she studied with Madame Darvash and Melissa Hayden on full scholarship. She joined the Connecticut Ballet Company. She made her screen debut as a Dancer in Alan Parker's 1980 musical drama Fame. Tilly's dance career came to an abrupt halt when, in 1979, a dance partner dropped her, causing a serious back injury.

Forced to give up dancing because of complications stemming from her back injury, Tilly moved to Los Angeles to pursue a career as an Actress and studied acting under Peggy Fuery. She made her television debut in the 1981 half-hour drama The Trouble with Grandpa, co-starring Elisha Cook, Jr.. After playing a prostitute in a second-season episode of Hill Street Blues, she appeared in her first starring role in the 1982 coming-of-age adventure film Tex with Matt Dillon.

In 1983, Tilly married her first husband, Tim Zinnemann, an American film Producer and son of film Director Fred Zinnemann. They met on the set of her first film, Tex. The marriage produced two children, Emily (born 1984) and David (born 1986), and ended in divorce in 1989.

In 1985, Tilly landed the acclaimed, title role in Norman Jewison's Agnes of God, appearing with Jane Fonda and Anne Bancroft. Playing the role of a novitiate nun who confesses her involvement in a virgin conception, Tilly "delivered a magnificent portrayal of a tormented young woman experiencing the ultimate crisis of faith". Tilly's critically praised performance earned her an Academy Award nomination and a Golden Globe Award.

In 1989 Tilly began a 5-year relationship with British actor Colin Firth, whom she met during the filming of Valmont. They moved from Los Angeles to a log house on five acres of mountainside property about an hour outside Vancouver near the town of Maple Ridge, British Columbia. Their relationship produced a son, william "Will" (born 1990), and ended in 1994.

Tilly is the author of six published novels. In 1994, Tilly's first novel Singing Songs was published by Dutton to generally positive reviews. Donna Rifkind from Publishers Weekly called the book "an impressive first novel", and the New York Times Book Review praised Tilly for "the remarkable coherence and clarity" of Anna's narrative voice. The book is about a young girl and her sisters living in the North West who are molested by their stepfather.

In 1995 Tilly married her second husband, John Calley, an American film studio executive and Producer 30 years her senior. They moved to Los Angeles where Calley worked as President and CEO of Sony Pictures Entertainment. The marriage ended in divorce in 2002.

In 2002 Tilly married her third and current husband, author Don Calame, who writes fiction for adolescents. They met during a writing seminar in Big Sur, California. The couple now lives in Toronto, Ontario.

Her second novel Gemma was published in 2006 by the Syren Book Company. and picked up by St. Martin's Press in 2010. The book is about a twelve-year-old girl who is kidnapped and taken on a cross-country journey in which she is physically and sexually abused by her captor.

Her third novel Porcupine was published in 2007 by Tundra Books. The book is about a twelve-year-old girl, Jacqueline "Jack" Cooper, whose life is shattered by the death of her father by friendly fire in the War in Afghanistan. Porcupine was a finalist for the Sheila A. Egoff Children's Literature Prize, shortlisted for The Canadian Libraries Association Best Children's Book 2008, Foreword Magazine Book of the Year and was an Ontario Library Best Bets 2008.

Her fourth novel First Time was published in 2008 by Orca Book Publishers. The novel is about a sixteen-year-old who is molested and physically abused by her mother's boyfriend, and must deal with the trauma alone without the help of her mother or best friend. First Time was a 2009 Golden Eagle Award Nominee, a 2009 YALSA Quick Picks and 2010 CCBC Best Books.

Tilly returned to acting in 2010, portraying the Blessed Mother, a Pope-like figure in the Caprica episode "Unvanquished". In 2011 she played Martha in Edward Albee's Who's Afraid of Virginia Woolf?, presented by the Blue Bridge Repertory Theatre in Victoria, B.C.

In January 2012 Global Television in Canada launched the six-part Bomb Girls about women who work in a munitions factory during World War II. Tilly stars as Lorna, the emotionally closed floor matron who blossoms as a leader and an appealing woman. She won the 2013 Lead Actress, Drama Canadian Screen Award for her work on the series.

Tilly's fifth novel A Taste of Heaven was published in 2013 by Puffin Books. A departure from the darker themes of Tilly's previous work, the novel is about two young girls who become friends who experience the "comical, sometimes bittersweet and melodramatic trials and tribulations of tweenhood". One reviewer wrote, "Tilly paints an insightful, memorable portrait of the ups and downs of friendship and the unwavering bonds of family, delving into age-old issues of honesty, trust, and loyalty. A Taste Of Heaven was shortlisted for the 2014 Libris Young Reader Book of the Year, a 2014 Diamond Willow Award and won the 2014/2015 Chocolate Lilly Award.

Her latest novel, Behind The Scenes, was published in 2014 by Puffin Books.