Dana Lynne Goetz was born in 1964 in Encino, Los Angeles, California, to Sandy Hill and Theodore Arthur “Ted” Goetz, a director of commercials. A diagnosis of Type I diabetes at an early age ended a promising athletic future. A 1982 article in People magazine reported that at age 10 Dana Hill had placed third nationwide in the 880-yard run and fourth in the mile run. A few weeks later, she collapsed on the track, which resulted in the diagnosis. The diabetes affected her growth and caused lifelong health complications. Despite her father’s strong discouragement, Hill’s initial work was in commercials (her first job was a 1973 commercial for the YMCA, spinning a basketball on her finger with Boston Celtics center Dave Cowens). However, to avoid the appearance of nepotism, she took her mother’s maiden name as her stage name and devoted herself to acting as a career. She appeared in guest roles on such programs as Family before landing a major role on the 1981–1982 CBS series The Two Of Us as Gabrielle “Gabby” Gallagher. While filming this series, the 17-year-old Dana Hill would sometimes be pulled over by the police while driving to the studio, because she looked too young to drive. Her breakthrough role was in the 1981 made-for-TV movie Fallen Angel. The 17-year-old Hill played 12-year-old molestation victim Jennifer Phillips, a role which earned her a Young Artist Award for Best Young Actress in a Television Special.

In 1982, Dana Hill played Sherry Dunlap, the daughter of Albert Finney and Diane Keaton in Shoot the Moon That same year, she played Frankie Addams, the lead character in the made-for-TV adaptation of The Member of the Wedding, co-starring with Pearl Bailey. In 1983, she starred with Rip Torn and Mary Steenburgen in the film Cross Creek, a semi-biographical story about Marjorie Kinnan Rawlings, author of The Yearling; in real life, her character was a young boy. In 1982 and 1983, Hill made two guest appearances in the TV series The Fall Guy. In season 1, episode 18 “Child’s Play”, she played a young girl called Libby. In season 2, episode 20 “P.S. I Love You” she had the role of 21-year-old stuntwoman Cassie Farraday. In 1983, she made a guest appearance on Magnum, P.I., in the episode “Basket Case”. She played a 13-year-old foster child, Willie, who joined Magnum’s youth basketball team. At age 19, she starred in a 1984 CBS Schoolbreak Special called Welcome Home, Jellybean, playing Geraldine “Jellybean” Oxley, a 12-year-old developmentally disabled girl whose parents take her out of an institution to experience a normal home life. The same year, she appeared in Shelley Duvall’s 1980s children’s TV series Faerie Tale Theatre, playing the Princess in an episode called “The Boy Who Left Home to Find Out About the Shivers”.

In 1986, she had another role in the TV series The Fall Guy. She appeared in the episode “Tag Team” as “Loser”. In 1985, the producers of the 1983 movie National Lampoon’s Vacation were planning a sequel, but Anthony Michael Hall declined to reprise his role as son Rusty Griswold, choosing instead to do the film Weird Science. The producers decided to recast the roles of both Griswold children, and so for National Lampoon’s European Vacation, Hill was chosen to replace the original actress who portrayed Audrey, Dana Barron. Dana Hill appeared as Sergeant Andrea Pritchett alongside George Clooney in Combat Academy (also known as Combat High), a 1986 film from the producers of Police Academy. Hill slipped into a diabetic coma in May 1996 and suffered a massive paralytic stroke the following month. On July 15, 1996, Dana Hill died at age 32.