Duvall was born in Houston, Texas to Robert Richardson Duvall, a defense attorney, and Bobbie Ruth Massengale, a real estate broker. She has three brothers, Scott, Shane, and Stuart. Duvall graduated from Waltrip High School. Duvall was working as a cosmetics saleswoman at a Houston Foley's when she was discovered at a party by production scouts for Altman's Brewster McCloud (1970). She is often thought to be related to Oscar winning actor Robert Duvall. She is not.

After a tough interview with Altman, she later won the lead role of Suzanne, the free-spirited love interest to Bud Cort's reclusive Brewster. Altman was impressed enough with Duvall's work to cast the young actress in his next films, including McCabe & Mrs. Miller (1971), Thieves Like Us (1974), and Nashville (1975). In 1977, Duvall was named Best Actress by the Cannes Film Festival and the Los Angeles Film Critics Association for her portrayal of the delusional Millie Lammoreaux in Altman's 3 Women.

That same year Duvall appeared in Annie Hall playing Woody Allen's one-night stand. Her next role would be Wendy opposite Jack Nicholson in Kubrick's The Shining (1980). Jack Nicholson states in the documentary Stanley Kubrick: A Life in Pictures that Kubrick was great to work with, but that he was "a different director" with Duvall.

Her landmark movie role also occurred in 1980 when she played Olive Oyl in Popeye, as critics noted that she was "perfect" for that role and that it was a character "she was born to play". Though she has appeared in many movies since, she never again reached the heights she did with Popeye.

From 1982-1987, Duvall produced and acted in a children's television series for Showtime called Faerie Tale Theatre. The one hour episodes re-told popular fairy tales.