Hunter was born in Conyers, Georgia, the daughter of Opal Marguerite (née Catledge), a housewife, and Charles Edwin Hunter, a farmer and sporting-goods manufacturer's representative. Hunter earned a degree in drama from Carnegie Mellon University in Pittsburgh, and for a while performed in the theatre scene there, playing ingenue roles at City Theatre, then named the City Players.
She eventually moved to New York City and roomed with fellow actress Frances McDormand. Hunter, in 2008, described living in The Bronx "at the end of the D [subway] train, just off 205th Street, on Bainbridge Avenue and Hull Avenue. It was very Irish, and then you could go just a few blocks away and hit major Italian." A chance encounter with playwright Beth Henley, when the two were trapped alone in an elevator, led to Hunter's being cast in Henley's plays Crimes of the Heart (succeeding Mary Beth Hurt on Broadway), and Off-Broadway's The Miss Firecracker Contest. "It was like the beginning of 1982. It was on 49th Street between Broadway and Eighth [Avenue] ... on the south side of the street," Hunter recalled in an interview. "[We were trapped] 10 minutes; not long. We actually had a nice conversation. It was just the two of us."
Hunter made her film debut in the 1981 horror movie The Burning. After moving to Los Angeles in 1982, Hunter appeared in TV movies before being cast in a supporting role in 1984's Swing Shift. That year, she had her first collaboration with the writing-directing-producing team of brothers Ethan Coen and Joel Coen, in Blood Simple, making an uncredited appearance as a voice on an answering-machine recording. More film and television work followed until 1987, when thanks to a starring role in the Coens' Raising Arizona and her Academy Award-nominated turn in Broadcast News, Hunter became a critically acclaimed star. She went on to the screen adaptation of Henley's Miss Firecracker; Steven Spielberg's Always, a romantic drama with Richard Dreyfuss; and the made-for-TV 1989 docudrama about the Supreme Court case Roe v. Wade.
Following her second collaboration with Dreyfuss, in Once Around, Hunter garnered critical attention for her work in two 1993 films, resulting in her being nominated for two Academy Awards the same year: Hunter's performance in The Firm won her a nomination as Best Supporting Actress, while her portrayal of a mute Scottish woman entangled in an adulterous affair with Harvey Keitel in Jane Campion's The Piano won her the Best Actress award.
Hunter went on to star in the comedy-drama Home for the Holidays and the thriller Copycat, both in 1995. She also appeared in David Cronenberg's Crash and as a sardonic angel in A Life Less Ordinary. The following year, she played a recently divorced New Yorker in Richard LaGravenese's Living Out Loud; starring alongside Danny DeVito, Queen Latifah, and Martin Donovan. Hunter rounded out the 1990s with a minor role in the independent drama Jesus' Son and as a housekeeper torn between a grieving widower and his son in Kiefer Sutherland's drama Woman Wanted.
Following a supporting role in the Coens' O Brother, Where Art Thou?, Hunter took top billing in the same year's television movie Harlan County War, an account of labor struggles among Kentucky coal-mine workers. Hunter would continue her small screen streak with a role in When Billie Beat Bobby, playing tennis pro Billie Jean King in the fact-based story of King's famed exhibition match with Bobby Riggs; and as narrator of Eco Challenge New Zealand before returning to film work with a minor role in the 2002 drama Moonlight Mile.
The following year found Hunter in the redemption drama Levity. Also in 2003, Hunter had the role of a mother named Melanie Freeland, whose daughter is troubled and going through the perils of being a teenager in the film Thirteen. The film was critically acclaimed along with Hunter and her co-stars and earned her nominations for the Academy Award and Golden Globe Award for Best Supporting Actress.
In 2004, Hunter starred alongside Brittany Murphy in the romantic satire Little Black Book, and the same year she voiced Helen Parr aka Elastigirl in the action animation superhero film The Incredibles, where she has also voiced her in the Disney Infinity video game series, she will reprise the role again in the upcoming 2018 sequel. In 2005, Hunter starred alongside Robin Williams in the black comedy-drama The Big White.
Hunter became an executive producer, and helped develop a starring vehicle for herself with the TNT cable-network drama Saving Grace, which premiered in July 2007. For her acting, she received a Golden Globe Award nomination, two Screen Actors Guild Award nominations, and an Emmy Award nomination. On May 30, 2008, Hunter received a star on the Hollywood Walk of Fame. In 2009, she was awarded the Women in Film Lucy Award. In 2016, Hunter played Senator Finch in Batman v Superman: Dawn of Justice.
Hunter's likeness was used to portray Senator Finch in the Batman v Superman: Dawn of Justice tie-in prequel comics, released by Dr. Pepper on February 3, 2016.
Hunter is unable to hear with her left ear due to a childhood case of the mumps. The condition sometimes leads to complications at work. Some scenes have to be altered from the script for her to use her right ear.
Hunter was married to Janusz Kamiński, cinematographer of Schindler's List and Saving Private Ryan from 1995 until 2001.
Hunter has been in a relationship with British actor Gordon MacDonald since 2001. The couple met in San Jose Repertory Theatre's production of playwright Marina Carr's By the Bog of Cats, in which she played a woman abandoned by her lover of 14 years, played by MacDonald. In January 2006, Hunter's publicist announced that Hunter had given birth to the couple's twin boys Claude and Press.
Hunter describes herself as an agnostic theist.