She was born in Spring Valley, New York on June 8, 1966, the youngest of three daughters. Her father is an advertising writer, and her mother is a former dancer with the American Ballet Theatre. As a child, she lived in New York, France and England. Although her parents were Jewish, Margulies' mother converted to Roman Catholicism at some point in her life and raised Julianna in the Catholic faith as well.

She obtained a B.A. from Sarah Lawrence College, where she appeared on campus in several plays. Her first movie role was as a prostitute looking to go straight, in the Steven Seagal film Out for Justice.

In 1994 she landed a role in the pilot episode of ER, as a character who attempted suicide, despondent over her relationship with George Clooney's character. Due to audience response, the plot was changed, and she went on to play the role of Nurse Carol Hathaway for six years, winning an Emmy nomination every year she was on the show, and the award itself for her first year's performance.

She turned down a $27 million offer to stay on the hit show, which would have made her one of the best-paid actresses on television. Since her departure, she has worked regularly on stage and screen. On stage she has appeared in Kate Robin's Intrigue With Faye, a Lincoln Center production of Jon Robin Baitz's Ten Unknowns, and The Vagina Monologues. Her film work since ER includes Evelyn with Pierce Brosnan and Ghost Ship with Gabriel Byrne. She starred as the protagonist and narrator (as Morgaine) in the 2001 TNT miniseries The Mists of Avalon. In April 2006 she appeared in the eighth episode of the sixth season of The Sopranos, playing realtor Julianna Skiff.