She started her film career with her older sister Nutan in Hamari Beti (1950) as Baby Tanuja. As an adult, she debuted in the film Chhabili (1960) which was directed by her mother, and had her sister Nutan, in the lead. The film that truly marked her transition to adult heroine was Hamari Yaad Aayegi (1961), directed by Kidar Sharma, who had earlier discovered Raj Kapoor, Madhubala and Geeta Bali.

During the mid 1960s, Tanuja started a parallel career in Bengali movies in Kolkata, starting with Deya Neya (1963), where she was paired opposite Uttam Kumar. She followed it up with Anthony-Firingee (1967) and Rajkumari (1970). Tanuja had on-screen chemistry with Soumitra Chatterjee, with whom she made some films such as Teen Bhuvaner Parey (1969) and Prothom Kadam Phool. Tanuja spoke her own lines in these Bengali films.

One of her early films noted for her acting was Baharen Phir Bhi Aayengi (1966), directed by Shaheed Latif. Incidentally it was Guru Dutt team's last offering, especially visible in the song "Woh hanske mile humse" (believed to have been picturised while Guru Dutt was still alive) who worked hard to help her "tone down" her performance. The result was that the natural, spontaneous performer gave a highly restrained performance, which became the highlight of the film — as well of her career — as she moved to lead roles soon after. Tanuja had an important supporting role in the hit film Jewel Thief. Her next big film was with Jeetendra; Jeene Ki Raah (1969), an immediate and surprise hit. In the same year, Tanuja won the Best Supporting Actress at Filmfare for Paisa Ya Pyar. After the success of Haathi Mere Saathi (1971), she acted in Door Ka Raahi, Mere Jeevan Saathi, Do Chor and Ek Baar Mooskura Do (1972), Kaam Chor, Yaarana, Khuddar, and Masoom. Some of the other films she has acted in are Pavitra Paapi, Bhoot Bangla, and Anubhav. Some of her Marathi films are Zaakol, Unad Maina and Pitruroon.

Afterwards, Tanuja retired from films for a number of years, but came back when her marriage ended. She was now offered supporting roles often starring former heroes. Her Pyar Ki Kahani hero Amitabh Bachchan had to call her "bhabhi" (sister-in-law) in Khuddar (1982). She also played a supporting role in Raj Kapoor's Prem Rog (1982).

She then appeared in films such as Saathiya (2002), Rules: Pyaar Ka Superhit Formula (2003), and Khakee (2003) as a supporting Actress. In 2008, Tanuja starred as a judge along with her daughter, Kajol, and son-in-law, Ajay Devgan on Zee TV's family dance series Rock-N-Roll Family. In 2013, Tanuja played a widow in the Marathi film Pitruroon made by Nitish Bharadwaj. For her role as a widow Tanuja has tonsured her head to make her character look authentic.

Tanuja married filmmaker Shomu Mukherjee in 1973. The couple has two daughters, actresses Kajol and Tanisha. Kajol is married to actor Ajay Devgan. Shomu died on 10 April 2008 from a heart attack, aged 64. Filmmakers Joy, Deb and Ram are her brothers-in-law. She is the aunt of actors Mohnish Behl, Rani, and Sharbani, and Director Ayan Mukherjee.