She was born to Irish-American Colby Carter and Mexican-American Juana Cordoba. Carter grew up an avid reader of the Wonder Woman comic books. She went to Arcadia High School in Phoenix, then to Arizona State University but after being voted the most talented student she dropped out in order to pursue a career in music. She toured as a singer with several rock groups before returning to Arizona in 1972.

She entered a local beauty contest and achieved her first national fame by winning Miss World USA in 1972 representing Arizona. After taking acting classes at several New York acting schools, she began making appearing on TV shows such as Starsky and Hutch, Cos and Nakia and B-movies including Bobbie Jo and the Outlaw (1976), which featured nude scenes of her skinny dipping. However, her acting career did not take off until she landed her starring role in the Wonder Woman television series.

Her earnest performance as the scantily clad superhero endeared her to fans and critics and the series lasted for three seasons. Thirty years after first taking on the role, Carter continues to be closely identified with Wonder Woman, so much so that it has proved difficult for producers to find a suitable candidate to play the character in subsequent aborted productions (work on the most recent attempt was announced in 2005).

Carter's other credits include the title role in a 1983 biopic of Rita Hayworth and a variety of television specials. She also starred in a couple of short-lived TV series. During the late 1970s, she recorded an album, Portraits and made numerous guest appearances on variety television programs in a musical capacity. She also sang two of her songs in the Wonder Woman episode "Amazon Hot Wax."

Carter has been married twice. Her first marriage was to her former agent Ron Samuels on May 28, 1977. They were divorced in 1982. Carter's married lawyer Robert Altman (not to be confused with the filmmaker of the same name) on January 29, 1984. Robert and Lynda have two children, James and Jessica Altman.

In 2001, Carter was cast in the low-budget comedy feature Super Troopers as Vermont Governor Jessman. The writer-stars of the film, the comedy troop Broken Lizard with member Jay Chandrasekhar directing, had specifically sought Carter for the role, with plans to approach other television actresses of the 1970s had Carter declined. Carter had her first appearance in a major feature film in a number of years in the 2005 big-screen remake of The Dukes of Hazzard, also directed by Chandrasekhar. She also appears in the 2005 movie Sky High as Principal Powers, the head of a school for superheroes. The script allows Carter to poke fun at her most famous character by having her state: "How do you expect me to do something like that? I'm not Wonder Woman."

Since September 26, 2005, Carter has taken on the role of Mama Morton in the West End London production of Chicago. She also had a part in the production of the videogame The Elder Scrolls IV: Oblivion (2006) (voice)