Born in Enid, Oklahoma, Farrell came to Hollywood towards the end of the silent era, after establishing herself on Broadway. Signed to Warner Brothers, she came to personify the wise-cracking, hard-boiled, and somewhat dizzy blonde of the early talkies, along with fellow Warner Brothers brassy blonde, Joan Blondell, with whom she would be frequently paired.

Her brassy persona was used to great effect in Little Caesar (1930) opposite James Cagney, in I Am a Fugitive from a Chain Gang (1932) opposite Paul Muni, in Havana Widows (1933) with Blondell, and in Mystery of the Wax Museum (1933) opposite Fay Wray.

She became one of Warner Brothers most prolific actresses of the 1930s, solidifying her success with her own film series, as Torchy Blane "Girl Reporter". In this role Farrell was promoted as being able to speak 400 words in 40 seconds.

Farrell went out of vogue in the 1940s but made a comeback later in life, winning an Emmy Award in 1963, for her work in the television series Ben Casey.

She was appearing on Broadway in a production of Forty Carats in 1969 when she was diagnosed with lung cancer.

She remained with the show until ill health forced her departure in November 1970. She died from lung cancer, aged 66, and was interred in the U.S. Military Academy Post Cemetery, West Point, New York.