Olson was born in Portland, Oregon to Donald Lee Olson, a publisher, and Melinda Leora, a nurse. Shortly after her birth, Olson relocated with her family to Spokane, Washington, then to Vashon Island, Washington, in Puget Sound, 13 mi (21 km) west of Seattle, where she lived until age eight. Her family subsequently relocated back to the Portland area, settling in Tualatin, where Olson grew up on a farm. Her father worked as the publisher of the Portland Tribune from 2000 to 2001. At age twelve, Olson was involved in a serious bicycle accident involving a vehicle, resulting in a fractured skull requiring reconstructive surgery. She graduated from Tigard High School in Tigard, Oregon in 1993.

Olson studied theater at the University of Oregon, graduating with a bachelor’s degree in theater arts in 1997. After college, she moved to Los Angeles to pursue acting professionally.

In 2004, she was cast as Deandra “Sweet Dee” Reynolds in the FX sitcom It’s Always Sunny in Philadelphia. She also voiced Ethel in the first season of the Comedy Central animated series Brickleberry. In the 2013 film The Heat she appeared as a Bulgarian druggie who engages in an exchange of cultural perspectives and insults with Melissa McCarthy’s character.

Olson married her It’s Always Sunny in Philadelphia boss and co-star, Rob McElhenney, in California on September 27, 2008. The couple started dating secretly during the second season of the series.

In 2009, McElhenney and Olson announced their purchase of Skinner’s Bar at 226 Market Street in Philadelphia (39°57′00″N 75°08′41″W / 39.949895°N 75.144795°W / 39.949895; -75.144795). It was renamed Mac’s Tavern. They had their first child, a boy named Axel Lee, on September 1, 2010. Olson went into labor at a game between the Los Angeles Dodgers and the Philadelphia Phillies, and Axel was born in their California home as planned. Their second son, Leo Grey McElhenney, was born on April 5, 2012.

She played a recurring role as Hartley Underwood, the “one-armed” neighbor in the FX series The Riches. In June 2016, the Human Rights Campaign released a video in tribute to the victims of the Orlando nightclub shooting; in the video, Olson and others told the stories of the people killed there. Also in 2016, Olson provided the voice of Destiny in Walt Disney’s Finding Dory.

Olson starred in the Fox sitcom The Mick, which premiered in January 2017. She also serves as an executive producer for the series. She returned in the second season of The Mick, which premiered in September 2017. However, Fox cancelled the series after its second season, ending in April 2018.