Louis-Dreyfus was born in New York City to Judith, a writer and special needs tutor, and Gérard Louis-Dreyfus (also known as William Louis-Dreyfus), a French-Jewish attorney and business executive. Her parents divorced a year later. After relocating to Washington, D.C., when Julia was eight, her mother married L. Thompson Bowles, Dean of the George Washington University Medical School.

Louis-Dreyfus spent her childhood in several states and countries in connection with her stepfather's work with Project HOPE, including Sri Lanka, Colombia and Tunisia. She graduated from the Holton-Arms School in Bethesda, Maryland in 1979, and attended Northwestern University in Evanston, Illinois, where she studied theater, appeared in the Mee-Ow Show, and was a member of the Delta Gamma sorority. After three years she left to begin work on Saturday Night Live, being rewarded by the University in 2007 with an honorary Doctor of Arts degree.

While at Northwestern, Louis-Dreyfus met future husband and Saturday Night Live comedian Brad Hall. She, Hall, and future SNL writer Paul Barosse all were members of the community's storefront theatre troupe, the Practical Theatre Company.

Louis-Dreyfus and Hall have two sons, Henry (born June 1992) and Charles (born May 1997).

Louis-Dreyfus was a cast member on NBC's Saturday Night Live from 1982 to 1985. While on SNL, she met writer Larry David, who would later co-create Seinfeld. Louis-Dreyfus also appeared in a few sitcoms and films over the years, but is best known for her nine-season role as "Elaine Benes" on NBC's Seinfeld from 1990 to 1998, appearing in all but three episodes. On the "Notes About Nothing," on the Season 1-2 DVD, Jerry Seinfeld notes that Louis-Dreyfus' ability to eat a peanut M&M without cracking the peanut aptly describes the actress: "She cracks you up without breaking your nuts".

After Seinfeld, Louis-Dreyfus began a new NBC sitcom, Watching Ellie, which was canceled after two abbreviated seasons. Louis-Dreyfus came to be seen as a victim of "the Seinfeld Curse", a term applied to typecast actors who, after appearing in an enormously popular television series or movie, have trouble finding popularity in other roles.

Her current series, The New Adventures of Old Christine, receives high ratings. She won the Lead Actress Emmy Award for her work on the show's first season, exactly 10 years after her Seinfeld win. Referring to the curse, she stated in her acceptance speech, "I'm not somebody who really believes in curses, but curse this, baby!"

She had a notable recurring guest role as the deceitful prosecutor Maggie Lizer on Arrested Development. She has also appeared on The Simpsons, providing the voice for Snake's girlfriend Gloria on three episodes.

She returned to host Saturday Night Live on May 13, 2006, becoming the first female former cast member to return as host. Louis-Dreyfus appeared with former Seinfeld mates Jason Alexanderand Jerry Seinfeld in the opening monologue, parodying the so-called "Seinfeld Curse". She mocked the curse once again while accepting her Emmy award in 2006. She has also appeared on Seinfeld co-creator Larry David's show Curb Your Enthusiasm, playing herself fictionally trying to break the "curse" by planning to star in a show in which she would play an actress affected by a Seinfeld-like curse.