Krakowski was born Jane Krajkowski in Parsippany, New Jersey, the daughter of Barbara, a college theater instructor and producing artistic director for the Women's Theater Company, and Ed Krajkowski, a chemical engineer. She has an older brother. Krakowski's father's family is entirely Polish and comes from Kraków, and although she knows few words in Polish, her father and grandparents are fluent. Krakowski grew up immersed in the local theater scene as a result of her parents' activities, saying in one interview "Instead of hiring baby sitters, they brought me along with them." She took ballet lessons from age four, but later stopped because she was the wrong body shape, instead moving more towards Broadway dancing. She attended the Professional Children's School in New York City.

She dropped the "j" from the family last name when she began working as an actress as people kept trying to pronounce the letter even though it was silent.

In her first major television role, Krakowski joined the soap opera Search for Tomorrow in 1984, playing the role of Theresa Rebecca (T.R.) Kendall, a role she played until the show ended in 1986. She was nominated for two consecutive Daytime Emmy Awards for the role in 1986 and 1987.

In 1996 she made an appearance on the television series Early Edition as Dr. Handleman (season 1, episode 3 "Baby").

In 1997, she played office assistant Elaine Vassal on the television series Ally McBeal for five seasons until 2002; her role earned her a Golden Globe Award nomination for Best Supporting Actress in 1999. In 2004, she guest starred on Law & Order: Special Victims Unit as Emma Spevak, a serial killer of elderly women. In 2006, Krakowski was cast in the NBC sitcom 30 Rock, where she plays Jenna Maroney, a cast member of the fictional late night sketch show TGS with Tracy Jordan. In 2009 and 2010, she received Emmy nominations for her role in 30 Rock.

Krakowski made her film debut in National Lampoon's Vacation; she has also appeared in Fatal Attraction, The Flintstones in Viva Rock Vegas (where she played Betty Rubble), Marci X, Alfie, Go, Cirque Du Freak: The Vampires Assistant, Dance with Me, Stepping Out, Pretty Persuasion, Kit Kittredge: An American Girl, and Mom at Sixteen. Krakowski was also originally cast in the horror film Sleepaway Camp, but dropped out just before filming began because she felt her character's death scene with a curling iron was too violent. She also appeared in When Zachary Beaver Came to Town as the mother who wants to become a singer. In 2004, she starred in the TV-musical-movie version of Alan Menken's A Christmas Carol, featured as a ghost from Christmas Past, with a solo-song.

A trained singer, Krakowski has made numerous appearances on stage. At age 18 she originated the role of Dinah the Dining Car in the 1987 Broadway production of Starlight Express. She appeared in the 1989 Broadway musical Grand Hotel as the typist and would-be-film-star Flaemmchen, for which she was nominated for a Tony Award. Her solo number "I Want to go to Hollywood" is included on the original cast recording. At the 2000 American Comedy Awards, Krakowski won rave reviews when she performed a sexually-charged musical tribute and love letter to Microsoft chairman, Bill Gates.

In 1995, she played the ditzy flight attendant April in The Roundabout Theatre Company's revival of Company. In 1996 she starred alongside Sarah Jessica Parker in the Broadway revival of Once Upon a Mattress.

In January 2002, Windham Hill Records released a Jim Brickman album titled Love Songs & Lullabies featuring Krakowski as a vocalist for the song "You", which became a hit on adult contemporary radio stations. Brickman and Krakowski also recorded an alternate Christmas version of the song. She also appeared on the album Broadway Cares: Home For The Holidays, singing the song "Santa Baby".

In 2003, she starred in the Broadway revival of Nine playing Carla, for which she won the Tony Award for Best Featured Actress. Krakowski is known for her infamous anti-gravity stunt during the number "A Call From The Vatican". Krakowski and the director struggled finding a company that would let her do air stunts without a harness; Krakowski came up with the idea of using the method previously portrayed in Broadway Bares. Krakowski recalled that the material took a long time to arrive, and the second time she ever did it was on the first performance.