She was born Carole Penelope Marsciarelli in The Bronx, New York to Anthony Wallace Marsciarelli (an Italian American) and Marjorie Irene Ward, who was of English and Scottish descent.

She is the sister of writer, producer and director Garry Marshall, neither of whom were raised Catholic, but rather in their mother's Protestant faith.

Penny played the role of the wise-cracking brewery worker Laverne DeFazio in the popular TV sitcom Laverne and Shirley from 1976 - 1983.

Marshall was married to actor and director Rob Reiner (1971 -1979).

Ironically, before their marriage she and future husband Reiner lived on opposite sides of the Bronx's Grand Concourse without knowing each other.

She has directed several successful feature motion pictures since the mid-1980s, including Big (first film directed by a woman to gross over USD $100 million), Awakenings and A League of Their Own, which starred Madonna and Rosie O'Donnell.

She is a graduate of Walton High School in New York City and attended the University of New Mexico.

She is also an avid collector of sports memorabalia.