After a string of parts in teen films, comedies and thrillers of varying commercial success, Madsen received critical acclaim and a Saturn Award for Best Actress for her portrayal of grad student Helen Lyle in Candyman (1992).

Outside film, Madsen has played recurring roles on Moonlighting (1989), Frasier (1998), American Dreams (2002–2003), Monk (2009), The Event (2011), Hell on Wheels (2012), Witches of East End (2013–2014), and Designated Survivor (2016–2017).

[7] Madsen later attended the Ted Liss Acting Studio in Chicago, and Harand Camp Adult Theater Seminar in Elkhart Lake, Wisconsin.

"[8] Madsen made her acting debut at age 22, in a bit part where she landed her role as Lisa in the romantic comedy film Class (1983), co-starring Jacqueline Bisset and Rob Lowe.

She portrayed a cellist named Madeline in the science fiction comedy Electric Dreams with Lenny Von Dohlen (1984).

As beauty queen Dixie Lee Boxx, she was the love interest of minor league baseball manager Cecil "Stud" Cantrell (William Petersen) in the HBO original film Long Gone (1987).

Madsen also played femme fatales in films such as Slam Dance (1987), Gotham (1988), The Hot Spot (1990), which co-starred Don Johnson and Jennifer Connelly, and Linda (1993).

She also starred as Helen Lyle, an anthropology student, in the horror film Candyman (1992), which drew good reviews and was a box office success.

She appeared in a small role in the Francis Ford Coppola drama The Rainmaker (1997) alongside Matt Damon and Claire Danes.

Film critic Roger Ebert said that Madsen had a "strong scene",[10] while reviewer James Berardinelli noted that "the supporting cast is solid, with turns from .

She co-starred alongside Jim Carrey in The Number 23 and Billy Bob Thornton in The Astronaut Farmer; both films were released in North America on February 23, 2007.

[13] In 2012, she joined the cast of the AMC western drama series Hell on Wheels as Mrs. Hannah Durant, first appearing in episode eight of season 2, "The Lord's Day".

In 2013, Madsen began appearing on Lifetime's Witches of East End as Penelope Gardiner, the main villainess of the first season.