His father owned and operated a dye factory, and died in 1953. His mother remarried champion golfer Bill Campbell, who helped raise him and his five siblings (three sisters and two brothers). From 1963 to 1965, Dourif attended Aiken Preparatory School in Aiken, South Carolina. There he pursued his interests in art and acting. Although he briefly considered becoming an artist, he eventually settled on the path to becoming an actor. This was inspired by his mother's participation as an actress in a community theater.

Starting in school productions, he progressed to community theater, joining up with the Huntington Community Players, while attending Marshall University of Huntington. At age 19, he quit his hometown college and headed to New York City, where he worked with the Circle Repertory Company. During the early 1970s, Dourif appeared in a number of plays, off-Broadway and at Woodstock, New York, including 'The Ghost Sonata', 'The Doctor in Spite of Himself' and 'When You Comin' Back, Red Rider?', in which he was spotted by director Miloš Forman who cast him in One Flew Over the Cuckoo's Nest (1975).

Although this film is frequently cited as his film debut, in fact, Dourif made his first big-screen appearance with a bit part in W.W. and the Dixie Dancekings (1975). Nevertheless, his portrayal of the vulnerable Billy Bibbit in Forman's film was undoubtedly his big break, earning him a Golden Globe (Best Actor Debut) and a British Academy Award (Supporting Actor): he was also nominated for an Academy Award for Best Supporting Actor. Skeptical of his instant stardom, Dourif returned to New York, where he continued in theater and taught acting and directing classes at Columbia University until 1988 when he moved to Hollywood.

Despite his attempts to avoid typecasting, he frequently plays demented, deranged, or disturbed characters, starting in Eyes of Laura Mars (1978), John Huston's Wise Blood (1979), and Forman's Ragtime (1981). Dourif then teamed up with director David Lynch for Dune (1984) and Blue Velvet (1986).

He has appeared in a number of horror films, notably as the voice of the evil doll Chucky in Child's Play (1988) and its sequels. Dourif broke from the horror genre with roles in Fatal Beauty (1987), Mississippi Burning (1988), Hidden Agenda (1990), and London Kills Me (1991). He also played Grima Wormtongue in Peter Jackson's Lord of the Rings trilogy.

On television, Dourif appeared in the Babylon 5 episode "Passing Through Gethsemane", in the early X-Files episode "Beyond the Sea" as condemned serial killer Luther Lee Boggs, and in Oliver Stone's Wild Palms. He played Lon Suder, a murdering psychopath who eventually redeems himself, in a three-episode story arc on Star Trek: Voyager. He appeared as the villain Saavedro in Myst III: Exile (2001), the third game in the popular Myst franchise. He plays Doc Cochran in the HBO series Deadwood.

He was formerly married to businesswoman and self-proclaimed psychic Joni Dourif and is the uncle of Nat Friedman.