Morton was born in Nottingham, England, the daughter of Pamela Freebury, a factory worker, and Peter Morton. Her parents divorced in 1979. She attended West Bridgford Comprehensive School and spent part of her childhood in care. Morton was reported to have had a stroke in 2006, as a result she was said to be close to death and had to relearn how to walk and talk. Morton has a daughter, Esme (born in 2000), with actor Charlie Creed-Miles. Morton is engaged to filmmaker Harry Holm, son of actor Ian Holm. At age 30, she gave birth to her second child. Daughter, Edie, was born January 4, 2008 in London weighing 7 lbs, 8 oz.

Morton began her career as a child actor. At 13 she joined the Central Junior Television Workshop. At 16 she moved to London and appeared in plays at the Royal Court Theatre, also securing an early break as a guest star in an episode of Cracker. Although she applied to institutions such as RADA, she received no further formal training.[5] She went on to star in television productions like Jane Eyre and The History of Tom Jones, a Foundling.

Starring roles in Band of Gold (1995), and the film Under the Skin in 1997, raised her profile in the UK. The latter impressed Woody Allen so much he cast her in his film Sweet and Lowdown for which she would receive a nomination for the Academy Award for Best Supporting Actress in 1999. In 2002 she won the British Independent Film Award for Best Actress for her work in Morvern Callar, followed by a nomination for the Academy Award for Best Actress for In America in 2003.

Morton played the Moors Murderess Myra Hindley in a television film Longford (2006). Set between 1967 and 1997, the film depicts the relationship between the infamous child killer and Lord Longford, the politician who spent years campaigning for her release. Morton was severely criticised by the relatives of the children who were killed by Hindley and Ian Brady but she insisted, "It is my duty as a performer to raise issues...we're afraid to look at". Morton received a 2007 Emmy nomination and won a Golden Globe for her performance in the film, both for Best Supporting Actress.

She plans to make her directorial debut in 2008 with the semi-autobiographical piece The Unloved.