In 1959 she acted in The Cry of Jazz, an influential short film dealing with jazz music and Black culture. Dillon’s first feature film was The April Fools in 1969. She also worked in television, notably in a guest-starring role in 1969 on an episode of the hit TV series Bonanza titled “A Lawman’s Lot Is Not a Happy One” (Season 11). She co-starred with David Carradine in the 1976 Woody Guthrie biopic Bound for Glory and was nominated in the Best Female Acting Debut category of the Golden Globe for her role as Memphis Sue.

Dillon married character actor Richard Libertini on September 30, 1963, and had one child with him, Richard. They divorced in 1978.

The following year she was nominated for a Best Supporting Actress Oscar for the role of a mother whose child is abducted by aliens in Steven Spielberg’s Close Encounters of the Third Kind. That same year, she made an uncredited cameo in The Muppet Movie and had a role in the comedy Slap Shot with Paul Newman. Four years later, Dillon was again nominated for a Best Supporting Actress Oscar for her performance as a suicidal teacher in Absence of Malice in 1981, working again with Newman.

In 1999 she appeared in Magnolia, directed by Paul Thomas Anderson, as Rose Gator, the estranged wife of terminally ill television game-show host Jimmy Gator (Philip Baker Hall). In 2005, she guest-starred in the episode of Law & Order: Special Victims Unit titled “Blood”.