Dahl was born in Minneapolis, Minnesota, of Norwegian descent, to Idelle (née Swan) and Rudolph S. Dahl, a Ford Motor dealer and executive. She cites her year of birth as 1928, although her birth record (1925-43442), available through the Minnesota Historical Society, shows she was born on August 11, 1925. An August 13, 2014 article in The New York Social Diary by David Patrick Columbia, entitled "Losses and Gains", references her 89th birthday celebration with her husband, children and family.
After graduating from Washburn High School, she held various jobs, including performing in a local drama group and briefly working as a model for department stores. Dahl's mother was involved in local amateur theatre. As a child, Dahl took elocution and dancing lessons and was active in theatrical events at Margaret Fuller Elementary School, Ramsey Junior High School and Washburn Senior High School. Dahl briefly attended the University of Minnesota.
In the early 1950s, she met actor Lex Barker; they wed on April 16, 1951, and divorced the following year, and Dahl went on to marry another matinee idol, Fernando Lamas. (Barker later married Lana Turner.) In 1958, Dahl and Lamas had their only child, Lorenzo Lamas. Shortly after giving birth to Lorenzo, Dahl slowed and eventually ended her career as an actress, although she still appeared in movies and on television occasionally.
Dahl and Lamas divorced in 1960, and Dahl later remarried. In addition to Lorenzo Lamas, Dahl has two other children: a daughter Christina Carole Holmes (born August 3, 1961) by third husband Christian R. Holmes, and a second son, Rounsevelle Andreas Schaum (born December 8, 1970), by her fifth husband, Rounsevelle W. Schaum. She has six grandchildren, one of whom is Shayne Lamas, and two great-grandchildren, and divides her time between New York City and West Palm Beach, Florida. Dahl has been married to Marc Rosen, a packaging designer, since 1984.
Dahl began her acting career in 1947. She reached the peak of her popularity and success in the 1950s. Her films include: Reign of Terror (1949), Three Little Words (1950), Slightly Scarlet (1956), and Journey to the Center of the Earth (1959).
Dahl was both a mystery guest and a panelist on the CBS game show What's My Line?. In 1953, she hosted ABC's anthology series The Pepsi-Cola Playhouse. In 1960, she played the role of Lucy Belle in the episode "That Taylor Affair" of Riverboat, alongside Darren McGavin.
She appeared on ABC's soap opera One Life to Live from 1981-84 as Lucinda Schenck Wilson. The character was planned as a short-termed role (she guest-starred from late 1981 to early 1982 and in late 1982), but Dahl was later offered a one-year contract to appear on the series from September 1983 to October 1984. Her last feature film, which followed a hiatus of more than two decades, was Night of the Warrior (1991), which co-starred her son, Lorenzo Lamas.
Dahl began writing a syndicated beauty column in 1952, and opened Arlene Dahl Enterprises in 1954, marketing cosmetics and designer lingerie. After closing her company in 1967, she began working as a vice president at ad agency Kenyon and Eckhardt that same year. Dahl moved to Sears Roebuck as director of beauty products in 1970, earning nearly $750,000 annually, but left in 1975 to found her short-lived fragrance company Dahlia. She entered the field of astrology in the 1980s, writing a syndicated column and later operating a premium phoneline company. Dahl has written more than two dozen books on the topics of beauty and astrology.