Waterston was born in Westminster, London, to actor Sam Waterston and a former model. After training as an actress at the Tisch School of the Arts at New York University, she began her career on screen and subsequently appeared in several independent films.

In the late 2000s, Waterston moved to Los Angeles, where she performed on the stage and also played small roles in the films Taking Woodstock and Being Flynn. In 2012, she appeared in several episodes of the HBO series Boardwalk Empire. Her career breakthrough came with a supporting role in the 2014 film Inherent Vice, which earned her a Satellite Award nomination. After that, she received a leading role alongside Elisabeth Moss in the film Queen of the Earth, as well as the role of the ex-wife of the protagonist in the biopic Steve Jobs.

In 2016, Waterston played the female lead in the film Fantastic Beasts and Where to Find Them, a spin-off of the Harry Potter film series. The film was released on November 18, 2016. She also received another leading role in Ridley Scott's film Alien: Covenant, the sequel to Prometheus.