Born Nell Ruth Hardy to Horace and Edna May Hardy in Birmingham, Alabama, Carter overcame adversity and hardships before finding success as an actress. She reported being raped at age sixteen and having had three miscarriages. She broke into stardom in the musical Ain't Misbehavin, for which she won a Tony Award in 1978. She also won an Emmy for the same role in a televised performance in 1982.

In the late 1970s she took acting roles in Ryan's Hope and The Misadventures of Sheriff Lobo before landing a steady role as housekeeper Nell Harper on the sitcom Gimme a Break!, for which she earned Golden Globe and Emmy nominations. The popular show lasted from 1981 to 1987.

After the show began, Carter's life took a turbulent turn. She married George Krynicki and converted to Judaism in 1982. She attempted suicide in the early 1980s, and entered a drug detoxification facility around 1985. Her brother Bernard died of AIDS in 1989. During this period Carter appeared in low-budget films, TV specials, and on game shows such as Match Game and To Tell the Truth.

In 1992, she had surgery to remove aneurysms. She had divorced Krynicki and married Roger Larocque that same year. In 1993 she divorced Larocque. She declared bankruptcy in 1995 (and again in 2002). In the mid-90's, Carter appeared on Broadway in a revival of Annie as Miss Hannigan.

Carter died from heart disease complicated by diabetes and obesity in 2003. Although Carter had previously declared bankruptcy and owed $1.1 million in back taxes, her friends and family were surprised to discover barely $200 in her bank account. At the time of her death, Carter had been rehearsing for a production of A Raisin in the Sun in Long Beach, California and filming a movie, Swing.

Carter is interred in the Hillside Memorial Park Cemetery in Culver City, California. She is survived by her two adopted sons (Joshua and Daniel) and a daughter (Tracy), conceived during her rape, as well as by her partner Ann Kaser. Her relationship with Kaser was not public knowledge until after her death.