He is known for portraying Jack Goodman in An American Werewolf in London (1981) and Paul Hackett in After Hours (1985), for which he was nominated for the Golden Globe Award for Best Actor – Motion Picture Musical or Comedy.

[7][8] Dunne began his professional acting career at age 19 with a small supporting role in The Other Side of the Mountain in 1975.

He has since appeared on both film and television, starring in An American Werewolf in London (1981) as Jack Goodman, Johnny Dangerously (1984) as Tommy Kelly, After Hours (1985) as Paul Hackett, Who's That Girl (1987) as Loudon Trott opposite Madonna, My Girl (1991) as Jake Bixler, Quiz Show (1994) as the Geritol Account Executive, Game 6 (2005) as Elliott Litvak, and I Like It Like That (1994) as Stephen Price.

In 2012, Dunne guest-starred as management consultant Marco Pelios in seven episodes of the premiere season of the Showtime TV series House of Lies.

[10][11] The film had a less than successful short run in theaters when it was released three years earlier with a "happy" ending and an alternate title, at the insistence of the distributor, United Artists.

[11] Their company, now called Double Play Productions, produced several films, including Baby It's You, After Hours, Running on Empty and Game 6.

For it, Dunne received a nomination for an Academy Award for Best Live Action Short Film, along with producer Thom Colwell.