Born in Sunnyvale, California, her father is an electrical engineer and her mother a computer scientist. An only child, she attended Mango Junior High (now Sunnyvale Middle School), Fremont High School in Sunnyvale and De Anza College in Cupertino.

In March 2006, Hatcher revealed to Vanity Fair that she was sexually abused from the age of 5 by her then uncle, Richard Hayes Stone (who was later divorced by Hatcher's aunt). Her parents, she said, were unaware of the abuse at the time. In 2002, she assisted Santa Clara County, California prosecutors in indicting Stone for a more recent molestation that led his female victim to commit suicide at the age of 14. Stone pleaded guilty to four counts of molestation and was sentenced to 14 years in prison. In an interview appearing in Vanity Fair magazine, Hatcher said she told prosecutors about her abuse in 2002 because she was haunted by thoughts of the 14-year-old girl who shot herself, and feared her uncle might escape conviction.

Hatcher began her performing career as a young girl taking ballet lessons at the San Juan Girls' Ballet Studio in downtown Los Altos, California; she later studied acting at the American Conservatory Theater. One of her early jobs (in 1984) was as a cheerleader with the San Francisco 49ers. During this time she also appeared as one of the mermaids on the show Love Boat in its final season.

While probably most noted for playing Lois Lane in the TV series Lois and Clark: The New Adventures of Superman, Hatcher has also appeared in such feature films as Spy Kids (2001), the 1997 James Bond film Tomorrow Never Dies, Dead in the Water (1991), 2 Days in the Valley (1996), and Heaven's Prisoners (1996). Hatcher has also made a guest appearance in Star Trek: The Next Generation and had a recurring role in MacGyver, playing his friend Penny Parker.

She also had a guest appearance in an episode of Seinfeld, in which her character, Sidra, broke up with Jerry because she found out Jerry was trying to have Elaine surreptitiously determine whether Sidra had breast implants. In one of the more memorable lines in the show, she declared, "Oh, and by the way: they're real, and they're spectacular."

Hatcher has also appeared in a series of popular Radio Shack television commercials alongside NFL Hall of Famer Howie Long. The pair remain very close friends, and together have bought farm land on the outside of Los Angeles, with the intent of eventually raising endangered species. Hatcher said her plan to do so came about after reading an article featuring the world's top 25 endangered species.

Teri hosted Saturday Night Live in 1996.

In 1997, Hatcher was voted "Sexiest Woman in the World" by the readers of FHM.

She now stars as the single mother Susan Mayer on ABC's Desperate Housewives, a role for which she won the Best Actress in a Musical or Comedy Golden Globe Award in January 2005. In 2005, Hatcher also won the Screen Actors Guild (SAG) award in the same category. In July 2005, she was nominated for an Emmy Award as Best Actress in a Comedy Series for the same role, along with co-stars Marcia Cross and Felicity Huffman, who won the award.

As of April 2006, Hatcher is one of the highest paid television actresses in the United States. She reportedly earns $380,000 per episode of Desperate Housewives. In May 2006 Teri released her first book, Burnt Toast: And Other Philosophies of Life, described as a personal, heartfelt, and light-hearted manifesto on life, love, and happiness. In conjunction with the book, Teri has also launched a line of apparel and other merchandise.

In 1988, Hatcher married Marcus Leithold, but they were divorced the following year. In 1994, she married actor Jon Tenney; they had a daughter, Emerson Rose, in November 1997, and divorced in March 2003. (She was reportedly forced to give Tenney half of her savings in the settlement).