Potter was born Monica Gregg Brokaw on June 30, 1971, in Cleveland, Ohio to Nancy and Paul Brokaw. Her mother was a secretary in a hospital, and her father invented the first flame-resistant car wax. Potter has three sisters (Kerry, Jessica, and Brigette). Her maternal grandparents were Irish immigrants, and she was raised Catholic.
During her childhood she attended the Villa Angela Academy, and graduated from Euclid High School. She also spent part of her early years in Arab, Alabama. Potter had wanted to be an actress since childhood. She began acting at the Cleveland Play House when she was in elementary school. Starting at age 12, she worked at a flower shop, and later in her teens, a sub sandwich shop and did some modeling for newspaper and magazine ads and local commercials. After appearing in several commercials in Chicago, Potter relocated to Los Angeles in 1994. In 1995 she appeared in the Alan Jackson music video for "Tall, Tall, Trees".
Potter made her screen debut in 1994, on CBS soap opera The Young and the Restless as Sharon Newman. She later appeared in several feature films, including Con Air (playing the wife of Nicolas Cage's character) and starring opposite Robin Williams in Patch Adams. In 1998, she played the love interest of doomed distance runner Steve Prefontaine in the movie Without Limits, and also appeared in the British comedy Martha, Meet Frank, Daniel and Laurence (1998). In 2001, she had two major roles, co-starring with Freddie Prinze, Jr. in Head Over Heels, and in the thriller Along Came a Spider with Morgan Freeman, based on the James Patterson best-seller.
In 2004, Potter played the role of Alison Gordon in the first Saw film. Later Potter worked on television. She was a cast member of the ABC legal drama Boston Legal but left during the second season. In 2009, Potter became a cast member of the new TNT series Trust Me which was cancelled after the first season due to low ratings. In 2009, she had a lead role in the horror-thriller remake of Wes Craven's The Last House on the Left, opposite Tony Goldwyn.
Potter played the role of Kristina Braverman in the comedy-drama Parenthood, receiving critical acclaim for her performance in the fourth season. In 2013, she won the Critics' Choice Television Award for Best Drama Supporting Actress and was nominated for a Golden Globe Award for Best Supporting Actress – Series, Miniseries or Television Film for her role in the show.
In 2015, Potter was joined by her mother and all three sisters on Celebrity Family Feud. The following year, she appeared in a HGTV reality series titled Welcome Back Potter, which chronicled the purchase and restoration of her childhood home in Cleveland, Ohio thirty years after the family sold it in 1987.
Potter was married to Tom Potter from 1990 to 1998; together they have two sons. In 2005, Potter married Daniel Allison, an orthopedic surgeon. Potter and Allison have one child, a daughter born in 2005.
Her father died in 2004 of cardiovascular disease.