Her performance in the film Immediate Family (1989) won her the National Board of Review Award for Best Supporting Actress, and she earned additional praise for her roles in Fried Green Tomatoes (1991) and Benny & Joon (1993).

Masterson later shifted her focus to television projects, appearing in Kate Brasher (2001) which she also produced, Something the Lord Made (2004), Law & Order: Special Victims Unit (2004–2007), Mercy (2010), NCIS (2017), Blindspot (2017–2019), and For Life (2020).

She also performed in the Broadway revival of Nine (2003) for which she was nominated for the Tony Award for Best Featured Actress in a Musical, and directed The Cake Eaters (2007).

[3] As a teenager, she attended Stagedoor Manor Performing Arts Training Center in upstate New York with actors Robert Downey Jr. and Jon Cryer.

In 1985, she returned to cinema in Heaven Help Us as Danni, a courageous teen running the soda shop of her gravely depressed father.

In May 1993, Masterson revealed she had written a screenplay for a film tentatively entitled Around the Block, a romantic comedy about a "woman who conquers her fears by becoming a singer"; in a cover story about Benny & Joon's box office success, she told Entertainment Weekly she was going to direct it herself, with principal photography expected that autumn.

In 2004, Masterson played Dr. Helen Taussig in the Emmy and Peabody Award-winning HBO biographical drama Something the Lord Made.

Masterson has narrated several audiobooks, including I See You Everywhere by Julia Glass, Book of the Dead by Patricia Cornwell, The Quickie by James Patterson[11] and Look Again by Lisa Scottoline.

In 2006, Masterson married actor Jeremy Davidson after they starred together in the 2004 stage production of Cat on a Hot Tin Roof.