One of Mullally’s earliest acting spots was on a McDonald’s commercial that also featured John Goodman. She made her series debut in 1986 in The Ellen Burstyn Show. She subsequently guest starred on sitcoms such as Seinfeld, Frasier, Wings, Ned and Stacey, Mad About You, Caroline in the City, 3rd Rock from the Sun and Just Shoot Me!. She played a central character in a season-five episode of Murder, She Wrote, “Coal Miner’s Slaughter”, recalling in 2012, “I hadn’t gotten a job for so long, and I was in a complete panic because I didn’t know how I was going to pay my rent. So I get a call one day from my agent that I’d gotten offered a guest role, and it paid $5,000. I literally fell down onto my knees and testified and wept. I played some former protégée of Jessica Fletcher. It’s one of my favorite things I’ve ever shot.”

In 1989, Mullally tested for the co-starring role of Elaine Benes on Seinfeld. The role was eventually given to Julia Louis-Dreyfus. In 1998, Mullally landed the role of Karen Walker, Grace Adler’s sarcastic, pill-popping assistant, in the NBC sitcom Will & Grace. She won the Primetime Emmy Award for Outstanding Supporting Actress in a Comedy Series in both 2000 and 2006, and was nominated in 2001, 2002, 2003, 2004, and 2005. She won the Screen Actors Guild Award for Outstanding Performance by a Female Actor in a Comedy Series three times, in 2002, 2003 and 2004, and with cast members Eric McCormack, Debra Messing, and Sean Hayes, she shared the Screen Actors Guild Award for Outstanding Performance by an Ensemble in a Comedy Series in 2001. She is the first of only two actresses to win a SAG Award three years in a row. She was nominated each year from 2000 until 2003 for the Golden Globe Award for Best Supporting Actress – Series, Miniseries or Television Film.

Mullally made her Broadway debut as Marty in the 1994 revival of Grease, and subsequently appeared as Rosemary in the hit 1995 revival of How to Succeed in Business Without Really Trying opposite Matthew Broderick. In 2007, Mullally starred as Elizabeth in Mel Brooks’ original Broadway musical, Young Frankenstein. She can be heard on the cast albums of all three productions.

In 1996, she starred in You Never Know at the Pasadena Playhouse. Mullally appeared in 2000 as Pamela in the multiple award-winning production of Chuck Mee’s The Berlin Circle, for which she won both the LA Weekly Theatre Award and the Backstage West Garland Award. Mullally starred as Beverly in the acclaimed production of Adam Bock’s The Receptionist at the Odyssey Theatre (notably, the longest sold-out run of a show in that theatre’s history), for which she was awarded the 2010 Backstage West Garland Award for Best Performance by an Actress.

Mullally met actor and future husband Nick Offerman in 2000 while acting in The Berlin Circle, a play produced by the Evidence Room Theatre Company, and they married three years later in 2003. While they were dating, Offerman appeared in a guest role on Will & Grace, in a 2001 Thanksgiving episode (Season 4, Episode 10, “Moveable Feast, Part 2”). Offerman appeared again, in a different role, in the Season 9 (2018) episode “Friends and Lover”. The couple have also appeared together in films such as The Kings of Summer and Smashed, the television series Parks and Recreation, and also performed voice work together in Bob’s Burgers and Hotel Transylvania 2.

In 2005, Mullally saw comedian and actor Bill Hader performing with his Second City class in Los Angeles, and shortly thereafter brought Hader to the attention of Saturday Night Live producer Lorne Michaels. Also in 2005, Mullally was awarded the Women in Film Lucy Award “in recognition of her innovation in creative works that have enhanced the perception of women through the medium of television”.

Also in 2009, Mullally starred in the ABC sitcom In the Motherhood. Based on the original web series, the television adaptation focuses on three mothers. She played Rosemary opposite Cheryl Hines and Jessica St. Clair. The series was poorly received and was canceled by ABC due to low ratings after airing just five out of seven episodes produced.

Mullally has appeared in Marc Forster’s Sundance competition entry Everything Put Together, Anywhere but Here with Susan Sarandon and Natalie Portman, About Last Night with Demi Moore and Rob Lowe, Speaking of Sex with James Spader, and Stealing Harvard with Tom Green and Jason Lee. Mullally played a singing teacher in the 2009 film remake of Fame, and can be heard on the soundtrack recording. Additionally, Mullally sang the song “Long John Blues” (performed on-screen by Kristen Bell) in 2010’s Burlesque. She played one of the leads’ mothers in the 2013 indie film The Kings of Summer and Mrs. Van Camp in the movie G.B.F. Mullally played Barb Fleming in the 2016 film Why Him?

Mullally co-starred in 2010 as Lydia on the Starz ensemble series Party Down. Mullally co-starred as “Chief” on the Adult Swim series Childrens Hospital. In 2011, Mullally began a recurring role as Dana Hartz, the mother of Penny (Casey Wilson), on the ABC sitcom Happy Endings. In the following months, Mullally joined the series Breaking In for its second season in 2012, after which the show was canceled.

Also in 2012, Mullally joined the first season of Bob’s Burgers as Aunt Gayle. She would reprise the role in subsequent episodes along with several minor roles.

Mullally and Stephanie Hunt formed the band Nancy & Beth in 2012. They went on tour in March 2013, along with Mullally’s husband, Nick Offerman.

From April 13 to June 1 in 2014, Mullally starred alongside her real-life husband, Nick Offerman, in Annapurna at the off-Broadway Acorn Theatre on New York’s 42nd Street Theatre Row.

In 2014 Mullally starred in the Broadway performance of It’s Only a Play with F. Murray Abraham, Matthew Broderick, Stockard Channing, Rupert Grint, Nathan Lane and Micah Stock. The show opened at the Gerald Schoenfeld Theatre October 9, 2014 and played through January 18, 2015. It then opened at the Bernard B. Jacobs Theatre January 23, 2015 and closed June 7, 2015. The show played 48 previews and 274 performances.

Mullally rejoined the Will & Grace cast, reprising as Karen upon its revival in 2017.

In June 2019 the band toured Australia beginning in Hobart and ending in Brisbane.