Bilson's father comes from a show Business family: her paternal grandfather is producer-director Bruce Bilson. Her great-grandfather George Bilson, born in Leeds, Yorkshire, UK, worked for RKO Pictures, where he headed the movie trailer department, and her great-grandmother Hattie Bilson was a Screenwriter whose credits include Pal, Canine Detective (1950). Bilson's classmates at Notre Dame High School in Sherman Oaks, California included Actress Kirsten Dunst, actor Rami Malek, and American Idol runner-up singer Katharine McPhee.

She made her screen acting debut in early 2003, appearing in one episode of Buffy the Vampire Slayer and 8 Simple Rules for Dating My Teenage Daughter. Bilson was subsequently cast in The O.C., which debuted in August 2003. Her character, Summer Roberts, was initially intended to appear in only a few episodes, but became a series regular after a successful run, as Bilson's on-screen romance with Seth Cohen (Adam Brody) became a noted aspect of the series.

At the 2005 Teen Choice Awards, she collected three awards: "Choice Hottie Female", "Choice TV Actress (Drama)" and "Best Onscreen TV Chemistry" (jointly won with Adam Brody). In 2005, Maxim magazine named her sixth in their annual "Hot 100 List"; in 2006, the publication awarded her #14.

In September 2006, Bilson refuted rumors she had been cast to star in a film version of the comic book character Wonder Woman;

Bilson approached DKNY Jeans in late 2007 with a view to design a clothing line with the fashion brand. Together they created Edie Rose. The collection was launched in September 2008. Her idea was to keep fashionable items accessible to young women by keeping the prices of each piece under $100. An advertising image was released in July 2008 which featured Bilson modelling her Edie Rose collection.

In late 2006, Bilson was cast in the film Doug Liman's thriller Jumper, as the replacement for Actress Teresa Palmer; the film was released on February 14, 2008. She appeared in a two-episode arc on The O.C. creator Josh Schwartz's NBC comedy, Chuck, and in the film New York, I Love You. She appeared in the 100th episode of How I Met Your Mother ("Girls Versus Suits") as Ted Mosby's latest love interest.

Bilson stated that she wanted to keep her fashion line "as separate as possible from Rachel Bilson the Actress. I'm hoping people will appreciate it for the clothes, not the person behind them." Much of her fashion collection was lost when her home was burglarized in May 2009. Bilson's fashions and sense of style made her the unwitting target of the Bling Ring, who burglarized her home on several occasions.

In 2011, Bilson collaborated with her personal Stylist Nicole Chavez, and shoe industry leader Steve Madden, to launch the footwear destination, ShoeMint, an "online customized shoe shopping experience".

In 2013, Bilson designed a shirt for Invisible Children.

By January 2008, the pair had been seen and photographed together around Los Angeles for almost a year, without confirming a relationship. In February 2009, Bilson appeared publicly with what appeared to be an engagement ring, though no official announcement was made. In August 2010, Bilson's representative confirmed there had been an engagement that had since been called off, giving no other details. The two reconciled three months afterward, and had daughter Briar Rose Christensen on October 29, 2014. The couple supports the coalition No Kids Policy, which seeks to prevent children of celebrities from being photographed without parental consent. Bilson and Christensen separated in September 2017.

In September 2008, she started shooting the indie romantic film Waiting for Forever, directed by James Keach. In September 2009 Rachel appeared as a Celebrity guest judge in the third episode of Project Runway (season 6). Bilson starred in the 2011 indie film L!fe Happens. In 2011, Bilson began starring in The CW series Hart of Dixie, executive produced by The O.C. creator Josh Schwartz. On May 7, 2015, the CW officially canceled the show after four seasons. In 2017, Bilson joined the cast of CMT's Nashville which reunites her with her former The O.C. co-star Chris Carmack.

In November 2017, it was announced that Bilson will be starring in the upcoming ABC drama series Take Two. The show was given a straight-to-series order.