Hagen was born Jean Shirley Verhagen in Chicago, Illinois. She studied drama and worked as a theater usherette before making her film debut as a femme fatale in Adam's Rib (1949).

The Asphalt Jungle (1950) provided Hagen with her first starring role, and excellent reviews. She is arguably best remembered for her comic performance in Singin' in the Rain (1952). As the vain and talentless silent movie star Lina Lamont, Hagen received an Academy Award for Best Supporting Actress nomination. MGM failed to provide her with a quality follow up role to enable her to build on her growing popularity, and by 1953 she had joined the cast of Make Room for Daddy. As the first wife of Danny Thomas, Hagen received three Emmy Award nominations, but after two seasons she grew dissatisfied and left the series.

Although she made frequent guest appearances in various television series, she was unable to successfully resume her film career, and for the remainder of her career played supporting roles, such as the friend of Bette Davis in Dead Ringer (1964).

Hagen has a star on the Hollywood Walk of Fame for her contribution to television, at 1502 Vine Street.

In the 1960s Hagen's health began to decline and she spent many years hospitalised or in care.