Posey was born in Baltimore, Maryland to a Catholic family. Her mother, Lynda, moved to Greenwood, Mississippi to work as a chef and culinary instructor for the Viking Range Corp. and her father, Christopher Posey, owned a Chevrolet dealership named Posey Chevrolet in Laurel, Mississippi; Posey's first name was a tribute by her father to 1950s supermodel Suzy Parker. Posey and her twin brother, Chris, were raised in Monroe, Louisiana and Laurel, Mississippi.

Posey attended the State University of New York at Purchase, where she roomed with actress Sherry Stringfield. Her first role was on the soap opera As the World Turns.

Posey appeared in minor roles in several major films of the early 1990s, including You've Got Mail. Her first lead role was in Party Girl (1995). Throughout the late 1990s, she starred in a large number of independent films and was named Queen of the Indies by Time Magazine, which cited 32 independent films to her credit, including Personal Velocity, Clockwatchers and The House of Yes, for which she received especially positive reviews for her portrayal of a delusional woman in love with her own brother. She has appeared in three of director Christopher Guest's mock documentaries: Waiting for Guffman (1996), Best in Show (2000) and a A Mighty Wind (2003). She will also appear in his next film, For Your Consideration. Posey is also a favorite of director Hal Hartley. She appeared in Henry Fool (1998), two of his shorts, "Opera No. 1" (1994) (with Adrienne Shelley, another Hartley regular) and "Sisters of Mercy" (2004). Also, Posey will appear in his upcoming, Fay Grim (2006).

Posey has had supporting roles in several big budget studio films, including The Sweetest Thing (2002), Scream 3 (2000), You've Got Mail (1998), Josie and the Pussycats (2001), and Blade: Trinity (2004). She has also had a recurring role on the television series Will & Grace, as Darlene, Jack's high-maintenance boss at Barneys. She also turned a scene-stealing performance in Superman Returns, playing "Kitty Kowalski", an assistant to villain Lex Luthor.

In 2006, Posey guest-starred as an ambitious but back-stabbing lawyer Marlene Stanger in the legal drama Boston Legal.

Posey appeared in a 2006 commercial for Pepsi Cola opposite Jimmy Fallon, dancing to the song "Newton - Streamline".

In 2000, she provided the voice of Umbriel the mermaid in the Futurama episode "The Deep South".

Posey also appeared on the season one finale episode of Project Runway in 2005. She was a spectator at New York Fashion Week, and also a judge alongside Nina Garcia, Michael Kors, and German supermodel/host Heidi Klum.

Posey is interested in pottery and is a contributing editor to Open City, a literary magazine whose editor, Thomas Beller she once dated. She can also play the mandolin and did so as part of her role in A Mighty Wind (2003), a film in which she also sang.

She used her vocal talents on certain records of her ex-boyfriend, Ryan Adams, whom she dated until early 2005, and also played the mandolin on The Dandy Warhols track "I Am Sound" from their Welcome to the Monkey House LP.

Posey lives in the East Village and is a cigarette smoker.