Applegate was born in Hollywood, California. Her father, Robert Applegate, was a record producer. Her mother, Nancy Lee Priddy, was a singer and an actress who survived breast cancer. Her parents split up after she was born, and her father remarried.

On October 20, 2001, Applegate married longtime boyfriend Johnathon Schaech, in a small mixed-religion Palm Springs ceremony attended by family and close friends. On December 5, 2005, the publicists of Applegate and Schaech confirmed that they had filed for divorce in Los Angeles Superior Court.

Applegate quit school at age 17 to pursue acting. From 1987 to 1997, she played Kelly Bundy on Married... with Children. From 1998 to 2000, she starred in her own sitcom, Jesse, on NBC.

While playing the title role in a revival of Sweet Charity, she injured her foot, and it was announced that the musical would close during previews. She persuaded the producers to rescind their decision, and on May 4, 2005, she made her Broadway debut to moderately good reviews. Sweet Charity ended its Broadway run on December 31, 2005. She also guest-starred on two episodes of Friends (in 2002 and 2003) as Amy Green, Rachel's (Jennifer Aniston) irresponsible older sister.

Applegate won a prime-time Emmy Award for her guest-starring role as Amy Green on Friends. In the 1980s and early 1990s, she was nominated four times in the annual Youth in Film Awards, two of which she won.

Applegate was the 2003 spokesperson for the Lee National Denim Day fundraiser which raises millions of dollars for breast cancer education and research. Applegate's mother is a breast cancer survivor.