Deschanel was born in Los Angeles, California, and brought up in various international locations because of her father's work. She is the daughter of Academy Award-nominated cinematographer Caleb Deschanel and actress Mary Jo Weir; her sister, Emily Deschanel, is also an actress. Her paternal grandfather was French hence her typical French last name (meaning "from the channels" or "from the little jugs" depending of the patronymists; it is from the Ain region) and the remainder of her ancestry is Irish. Her sister revealed in a recent French interview that when they were little they spent lots of summers near Lyon, France where they still have family. The name "Zooey" (IPA pronunciation: ['zo.i]) was inspired by the male character of the same name in J. D. Salinger's novel Franny and Zooey.

Zooey attended the French Woods Festival of the Performing Arts, an elite performance summer camp located in New York. She attended Northwestern University before dropping out to pursue her acting career.

She made her film debut in Lawrence Kasdan’s (1999) comedy Mumford. Deschanel then appeared as Patrick Fugit’s rebellious older sister in Cameron Crowe's semi-autobiographical Almost Famous (2000). Her next roles were in the small independent film Manic as a mental patient and in the Tim Allen movie Big Trouble. Next she co-starred in Abandon with Katie Holmes playing her best friend. Her role as a disaffected drugstore clerk in the Jennifer Aniston film The Good Girl (2002) followed after that. Her next starring role was in All the Real Girls (2003), as a sexually curious 18-year-old virgin who has a life-changing romance with an aimless 22-year-old man (Paul Schneider). For the role, Deschanel was voted Best Actress at the Mar del Plata Film Festival and also nominated for a 2004 Independent Spirit Award.

Deschanel played a department store elf opposite Will Ferrell in the comedy Elf (2003), and a lead role in the 2004 film Eulogy. Later that year, she worked again with Ferrell, starring opposite Ed Harris in the dark, off-beat dramedy Winter Passing. She also starred as Trillian "a rather nicely descended ape-person," in the movie adaptation of Douglas Adams's science fiction series The Hitchhiker's Guide to the Galaxy (2005). Recently, she appeared as Sarah Jessica Parker's neurotic roommate in Failure to Launch (2006). She has also appeared as Ms. Edmunds in Bridge to Terabithia (2007). Deschanel was also costar to voice Lani Aliikai in the recent penguin hit Surf's Up (2007). Most recently, she has signed on to star opposite Mark Wahlberg in M. Night Shyamalan's The Happening (2008).

Deschanel has appeared as a television actress on the programs Veronica's Closet and Frasier and in various music videos, including The Offspring's "She's Got Issues." She also appeared in a TV commercial for Gap clothing "Down on Khaki Street" in 2002. She has most recently been on Showtime's Weeds, as Andy Botwin's quirky ex-girlfriend, Kat. She will play DG, the lead in the new Sci Fi Channel miniseries Tin Man, a re-imagining of the The Wonderful Wizard of Oz.

Deschanel appears with fellow actress Samantha Shelton in the cabaret act If All the Stars Were Pretty Babies. As well as performing vocally in several of her films, including Bridge to Terabithia, Elf, Once Upon a Mattress, The New Guy, and Winter Passing, Deschanel has performed live with a number of musicians, including M. Ward and The Citizens Band. Her piano composition "Bittersuite" was used thematically in Winter Passing, in which she starred. She has also recorded a version of the song "Hello Dolly" from the musical of the same name. Deschanel recently appeared on a Seattle radio talk show along with M.Ward to promote their upcoming album which is a mixture of country and rock and roll. While on the show Deschanel and Ward performed four songs ("You Really Got A Hold Of Me," "Change is Hard", "Magic Trick", and "Send it to Me"). In March 2007, Jason Schwartzman's band Coconut Records released an album titled Nighttiming which featured Zooey on two songs ("Slowly" and "Ask Her To Dance").