She was born Betty Thomas Nienhauser in St. Louis, Missouri. She graduated from Ohio University (in Athens, Ohio) with a Bachelor of Fine Arts degree. She worked as an artist and taught school in Chicago before deciding to pursue a career in show business.

Thomas joined The Second City comedy group and appeared in the films Tunnel Vision (1975) and Chesty Anderson, USN (1976), Used Cars (1980) and Loose Shoes (1980) and on the TV series The Fun Factory (1976).

While Thomas had been building her career in comedy, her breakthrough role as an actress came when she was cast in the dramatic role of police officer Lucille Bates on the TV series Hill Street Blues (1981-1987). She was nominated for six Emmy Awards for this role and won one for Best Supporting Actress in 1985.

Following the end of the series, Thomas moved into directing. She first worked in TV, directing episodes of series such as Doogie Howser, M.D., Dream On, Hooperman, Mancuso, FBI, Midnight Caller, On the Air, Parenthood, Shannon's Deal, Sons and Daughters, and Star Trek: The Next Generation and TV movies such as Couples (1994), My Breast (1994), and The Late Shift (1996). She won Emmys for her direction of Dream On in 1990 and My Breast in 1994.