Hamilton was born in Wimbledon, London to a non-theatrical family. She attended St Hilary's School, a private school in Surrey, from 1974–82, then Prior's Field School, Godalming until 1987.

During the 1990s, she had supporting roles in three adaptations of Jane Austen's novels. These include the 1995 serial Pride and Prejudice as Mrs Forster, the 1995 film Persuasion as Henrietta Musgrove, and the 1999 film Mansfield Park as Maria Bertram.

In 1995, Hamilton appeared in Ibsen's The Master Builder directed by Peter Hall, starring Alan Bates and Gemma Jones and performed at the Haymarket Theatre in the West End of London. The Independent described Hamilton as a "formidable talent" despite being a newcomer, and noted that she had previously appeared in two performances held at the Orange Tree Theatre in London, one of them being an adaptation of a play by James Saunders. The Master Builder earned Hamilton the London Critics Circle Theatre Award for Most Promising Newcomer. In 2000 she received the Critics' Circle Theatre Award for her performance in As You Like It, Crucible Theatre.

Hamilton won the role of Queen Victoria in the 2001 BBC-TV production Victoria & Albert, despite facing strong competition and being relatively unknown at the time. She auditioned with the Director John Erman in a London hotel suite, and after reading lines from several more scenes at his prompting, was offered the part immediately. Noting that the monarch is typically depicted as stern and stout, Hamilton desired to show a younger version who "loved parties and balls and theatre and opera and new dresses" after a childhood spent in a "forbidding environment".

She made her Broadway debut in the 2003 play A Day in the Death of Joe Egg, co-starring alongside the Comedian Eddie Izzard. She had starred with Clive Owen, and later Izzard, in a successful London production of the play the previous year, in which she and Izzard portray the parents of a girl with severe brain damage who attempt to save their marriage through jokes and black comedy. For her performance in the Broadway adaptation, Hamilton received a nomination for Tony Award for Best Actress in a Play.

The following year she appeared in Suddenly, Last Summer (2004), an adaptation of the Tennessee Williams play, performed at the Lyceum Theatre in Sheffield. For her performance, she was honoured as Best Actress by winning the Critics' Circle Theatre Award and Evening Standard Theatre Award. Her success lead some of the media to brand her as "the next Judi Dench".

In 2005, Hamilton appeared in the three-part miniseries To the Ends of the Earth alongside Benedict Cumberbatch and Jared Harris. The production, an adaptation of the novels of the same name by william Golding, featured various self-absorbed characters who are forced to remain in close quarters while sailing on a ship to Australia during the Napoleonic Wars. Hamilton described the production as having "some of the most beautiful scripts I've seen", and called her character Miss Granham "one of the strongest people on the boat".

From 2008 to 2011, Hamilton appeared in the BBC1 series Lark Rise to Candleford as Ruby Pratt, one of two spinster sisters who run a high fashion shop in a small 19th-century town. The Guardian deemed Ruby's rivalry with her sister Pearl (played by Matilda Ziegler) as a highlight of the series, believing both actresses portrayed their characters with "infectious relish". In 2013, Hamilton played Peggy in the BBC drama series What Remains.

In 2015, Victoria starred in the BBC1 Drama, Doctor Foster, playing a character named Anna, a lady who lived across the road from Gemma & Simon Foster, played by Suranne Jones and Bertie Carvel.

In 2016, she appeared in the Netflix series The Crown as Queen Elizabeth The Queen Mother. The drama series, which is scheduled to span over six seasons, depicts the relationship between Queen Elizabeth II and Prince Philip, Duke of Edinburgh from 1947 to the present.

In 2017, Victoria reprised her role as Anna in Series 2 of the BBC1 Drama, Doctor Foster, and featured in episodes 1-4 of Series 2, the character had moved away by the final episode.