Her first movie role was in 20 Mule Team in 1940. She was chosen by Orson Welles to appear in The Magnificent Ambersons, but she didn't have a starring role until The Razor's Edge in 1946, for which she won the Academy Award for Best Supporting Actress.
In 1950 she was chosen to star in All About Eve, largely because of a resemblance to Claudette Colbert, who had initially been chosen to co-star in the film. Baxter received a nomination for Best Actress for the role.
She has a star on the Hollywood Walk of Fame at 6741 Hollywood Blvd.