Bagley was born in Minneapolis, Minnesota to Carol and Elwyn Bagley. He has four siblings, Anne, Patrick, Kit and Dan. The family also lived in Madison and Trempealeau, Wisconsin, and Niles, Michigan.
After high school, Tim moved to Southern California to perform with the singing group, The Young Americans. During this time, he also attended California State University Fullerton, where he majored in Art with a Psychology minor. At some point he began taking acting classes with Nina Foch and Howard Fine, and began training and working with The Groundlings. In 1994, Fern Champion and Mark Paladini cast Bagley in his first feature film role as Irv the mechanic in the hit film The Mask.
In 1989, Bagley began studying with The Groundlings, and was soon writing and performing with their prestigious Main Stage Company. Although he retired from the theatre's Main Company in the mid 1990s, Bagley still comes back regularly to perform in The Groundlings’ all-improv show Cookin' with Gas. In 1995, Bagley left the Groundlings and turned his attention to television. After guest appearance on Diagnosis: Murder and Seinfeld, he landed his first regular role on the Showtime series Howie Mandel's Sunny Skies.
Since breaking into television in the early 1990s, Bagley has become a familiar face on primetime television. He has guest starred on such shows as Seinfeld, Wings, Dharma & Greg, According to Jim, Curb Your Enthusiasm, The X Files, Suddenly Susan, ER, Ellen, 3rd Rock from the Sun, The Nanny, and Desperate Housewives.
He has also had regular and recurring roles in such hit shows as The King of Queens, Hope & Gloria, Strip Mall, and 7th Heaven, and portrayed fellow OCD sufferer Harold Krenshaw on Monk for several episodes, often antagonizing the titular character, Adrian Monk and his assistants, Sharona Fleming and Natalie Teeger. He also appeared in "Grimm" as a blutbad.
But he is perhaps best known on television for his appearances as Larry, one half of a married gay couple with an adopted daughter, on the hit sitcom Will & Grace.
He also starred with Lisa Kudrow and Victor Garber on Web Therapy, the series of online vignettes developed by Kudrow which was adapted into a half-hour show by Showtime. He can also be seen as Principal Pearson on the 2016 TV Land comedy Teachers.
In addition to his work in independent films, Bagley has appeared in big-budget movies like The Mask, Austin Powers: The Spy Who Shagged Me and Knocked Up. Other high-profile films include Employee of the Month, Happy, Texas and Mistress, starring Robert De Niro. He appeared briefly at the beginning of the 2006 film Accepted.
He also had a memorable monologue in The Day After Tomorrow as TV news reporter Tommy Levinson, first seen trapped at the Santa Monica Pier during a hailstorm, and later reporting live as tornadoes strike Los Angeles (being killed when he is hit by flying debris). Bagley delivered his lines with a helicopter hovering a mere 10 feet above his head, only to discover years later that director Roland Emmerich describes it as one of the most dangerous and terrifying shots he's ever done.
Bagley won two LA Weekly Theater Awards for best solo comedy performance in Groundlings, Pretty Groundlings, and best ensemble for Groundlings, Good and Twenty. He later won the Jury Award at the U.S. Comedy Arts Festival in Aspen, Colorado for his one-man show, Happy Hour, a poignant comedy about his family and personal tragedy. Additionally, Bagley created a successful one man show based on his experiences as a butler at the Playboy Mansion. Clean Boy, Dirty Stories, first presented at The Groundlings, went on to achieve great critical acclaim at Aspen Comedyfest.