Timothy Hutton was born in Malibu, California. His father was actor Jim Hutton; his mother, Maryline Adams (née Poole), was a teacher. His parents' marriage dissolved when Hutton was three years old, and his mother took him and his older sister with her to Boston. The family returned to California when Hutton was 12.

"A lot of people think that because my father was an actor, I come from this big show-business background", Hutton told Bruce Cook of American Film magazine in 1981. "But that's not how I grew up at all. My mother took us to Cambridge because she wanted to get her M.A. She wound up teaching in Connecticut, but the way she saw it, after awhile, if we all stayed there, my sister and I would just wind up as the proprietors of the local drugstore or something, so that was why she took us to Berkeley — to get us into the world, I guess. Now she's given up teaching and she's into printing miniature books."

When he was 16 Hutton sought out his father, living with him in Los Angeles while attending Fairfax High School. There, while playing Nathan Detroit in a school production of Guys and Dolls, Hutton realized he wanted to become an actor. With encouragement from both of his parents, Hutton carefully built himself a career in television.

Timothy Hutton's career began with parts in several television movies, most notably the 1979 ABC TV film Friendly Fire. That year, he also played the son of Donna Reed in the Ross Hunter NBC television film, The Best Place To Be. Hutton then made two CBS made-for TV films in 1980 - Young Love, First Love with Valerie Bertinelli and Father Figure with Hal Linden. For his first feature film performance, as Conrad Jarrett in Ordinary People (1980), Hutton won both the Academy Award and the Golden Globe for Best Supporting Actor. His performance also earned Hutton the Golden Globe Award for New Star of the Year in a Motion Picture – Male. Immediately following his great success, Hutton starred in the acclaimed 1981 ABC television film A Long Way Home co-starring Brenda Vaccaro.

However, Hutton soon fell victim to the Oscar jinx. His next feature film, Taps with George C. Scott, while popular with audiences, was disappointing. During the next several years, his motion pictures such as Iceman, Daniel, Turk 182, Made In Heaven, and Q & A all flopped at the box office. His only substantial hit was 1985's The Falcon and the Snowman which teamed him with Sean Penn.

During the late 1980s and into the 1990s, Hutton began to take featured parts in films, most notably in Everybody's All American with Jessica Lange and Dennis Quaid and French Kiss with Meg Ryan and Kevin Kline. In 1989, Hutton made his Broadway stage debut opposite his Ordinary People co-star Elizabeth McGovern in the A.R. Gurney play, Love Letters. He followed this with another Broadway role in the Craig Lucas hit comedy, Prelude To A Kiss, which also starred Mary-Louise Parker and Barnard Hughes.

Moving on to television, he starred as Nero Wolfe's assistant and leg-man Archie Goodwin in the A&E television series A Nero Wolfe Mystery (2001–2002); he also served as an executive producer, and also directed several episodes of the series. His other directing credits include the family film Digging to China (1998). In 2001 Hutton starred in the television miniseries WW3, and in 2006 he had a lead role in the NBC series Kidnapped, playing Conrad Cain, the wealthy father of a kidnapped teenager. He appeared in 15 feature films from 2006 to 2008.

Hutton is currently starring in the television series Leverage, where he plays former insurance investigator Nathan Ford who leads a group of thieves and become modern-day Robin Hoods.

Hutton is one of the owners of the New York City restaurant and bar P. J. Clarke's. In 2003 Hutton became president of the prestigious Players, a New York actors' club, but he resigned in June 2008 due to work keeping him in Los Angeles.

Hutton has married twice. His first marriage (1986–1990) was to actress Debra Winger; they have a son, Noah. In 2000, he married illustrator Aurore Giscard d'Estaing, niece of former president of the French Republic Valéry Giscard d'Estaing. Their son Milo was born in Paris on September 11, 2001 (Timothy Hutton interview with Sarah Hampson, The Toronto Globe and Mail, December 28, 2002). In July 2009, US Weekly reported that Hutton and his second wife had separated (July 20, 2009, "It's Over!"). He became a Freemason in a lodge in New York City in 2005. Hutton dated Angelina Jolie for a few years before she married Billy Bob Thornton.