Louis-Dreyfus was born in New York City; her paternal grandfather was Pierre Louis-Dreyfus, a French Jew who fought in the French Resistance during World War II. Her father is French billionaire Gerard Louis-Dreyfus (who changed his name to William in the 1940s). Her cousin Robert Louis-Dreyfus is the former owner of Adidas (1993-2001) and the current owner of the French football club Olympique de Marseille. Some biographies claim she is related to the late Alfred Dreyfus, a French military officer best known for being the focus of the Dreyfus affair.

Louis-Dreyfus was a cast member on NBC's Saturday Night Live from 1982 to 1985. While on SNL, she met writer Larry David, who would later co-create Seinfeld. Louis-Dreyfus also appeared in quite a few sitcoms and films over the years but is best known for her nine-season role as "Elaine Benes" on NBC's Seinfeld from 1990 to 1998.

After Seinfeld, Louis-Dreyfus began a new NBC sitcom, Watching Ellie, which was soon cancelled. She had a notable recurring guest role as the compulsively lying prosecutor Maggie Lizer on Arrested Development. She currently stars in the CBS sitcom The New Adventures of Old Christine.

She has been married to actor/writer Brad Hall since 1987, whom she met while they were students at Northwestern University in Evanston, Illinois (Hall also worked on SNL). The couple have two sons, Henry (Born 1992) and Charles (Born 1997).