She is the younger daughter of the late actor Sir John Mills, and the late playwright Mary Hayley Bell. She is also the younger sister of actress Juliet Mills, who appears on the U.S. soap opera Passions.

Mills was 12 when she was discovered by J. Lee Thompson, who was looking for a boy to play the lead role in Tiger Bay. She went on to take the lead in several other films, notably Whistle Down the Wind (1961). Hayley starred in the Disney Classic Pollyanna, a story about a young girl who moves in with her aunt.

Walt Disney's wife, Lillian Disney, loved her acting, and so she was contacted to participate in the Disney film The Parent Trap. She played a pair of twins who reunite their parents after a long time, and her acting earned her a special Oscar. Other Disney films in which she appeared included In Search of the Castaways, Summer Magic and That Darn Cat!. In 1998 she was awarded the prestigious Disney Legend award by The Walt Disney Company.

In 1971, when she was 25, she married Roy Boulting, then 58, who was 33 years her senior. They had one child, Crispian. Hayley and Roy divorced in 1977, when she was 31 and he 64. Crispian later became a singer known as Crispian Mills, and also as the lead guitarist for the defunct band Kula Shaker. Her second son, Jason Lawson, is the product of a 1970s relationship with British actor Leigh Lawson.

Mills has starred in many shows and plays since, more notably as the title character in Good Morning, Miss Bliss (the short-lived precursor to Saved by the Bell), and as Anna Leonowens in the British production of The King and I.

She made her Off-Broadway debut in Sir Noel Coward's Suite in Two Keys in 2000 opposite American actress Judith Ivey.