Falco was born in Brooklyn, New York to Frank Falco (an Italian commercial artist, who now works as a sculptor) and Judith Anderson (a Swedish actress who has since retired from the profession); her siblings are Joseph, Paul, and Ruth. She was raised in Northport, on Long Island, graduating from Northport High School in 1981 after playing Eliza Doolittle in a production of My Fair Lady. She attended SUNY Purchase.

Falco is the only actress to have received a Golden Globe, an Emmy, and a SAG Award in the same year, for her performance as Carmela Soprano in the television series The Sopranos. Prior to that, she was a regular performer on Oz. She has also had recurring roles on Law & Order and Homicide: Life on the Street.

In the 2004 presidential election, Falco emerged on the political scene as a spokeswoman for M.O.B. (Mothers Opposing Bush). She endorsed Democratic presidential nominee John Kerry.

She is a survivor of breast cancer, and in December of 2004 she adopted a son, named Anderson Falco ("Anderson" is her mother's maiden name).

She has won three Emmys, two Golden Globes and three Screen Actors Guild Awards.