Taylor was born in Allentown and grew up in neighboring Macungie, Pennsylvania. She is a graduate of Allentown Central Catholic High School.

She began her acting career in 1989, at the age of 18, on the Nickelodeon Network children's television series Hey Dude, where she played the perky lifeguard character Melody Hanson. She continued in that role through 1991, while making various guest appearances on other programs.

In 1996, Taylor was awarded the lead role in the television series, Party Girl as a self-destructive rave party organizer, who indulges in drugs and all-night partying.

Following Party Girl, Taylor's career advanced rapidly, highlighted by guest television appearances on HBO's Curb Your Enthusiasm, FOX's Arrested Development, and NBC's Friends and Seinfeld. She also played the best friend character Holly Sullivan in the 1998 comedy The Wedding Singer.

Taylor's physical resemblance to Maureen McCormick of The Brady Bunch, coupled with several successful comedic guest appearances on Ellen, led to her being cast as Marcia Brady in the 1995 film The Brady Bunch Movie and A Very Brady Sequel the following year.

In the 1990s, Taylor dated actor Matthew Lillard. In May 2000, she married actor and writer Ben Stiller, who she met while filming Heat Vision and Jack. Taylor has since appeared opposite Stiller in a number of films, including Zoolander (2001) and Dodgeball: A True Underdog Story (2004). On April 10, 2002, Taylor and Stiller had their first child, a daughter named Ella Olivia Stiller. They had a second child, a son named Quinlin Dempsey Stiller, on July 10, 2005.

On February 9 2006, Taylor guest-starred on NBC's My Name Is Earl. The episode, titled "The Professor", featured her as a sexy and beautiful college professor. Earl becomes infatuated with her after attempting to return a laptop that he stole from her.