Douglas was born Diana Love Dill in Devonshire, Bermuda on January 22, 1923. Her father Lieutenant Colonel Thomas Melville Dill (also the name of her great-grandfather, a mariner) was a former Member of the Colonial Parliament (MCP) (representing the Parish of Devonshire in the Parliament of Bermuda), Attorney General of Bermuda, and former Commanding Officer of the Bermuda Militia Artillery. Her mother Ruth Rapalje (née Neilson) had roots in New Jersey. Douglas’ brother Bayard was a prominent lawyer and politician. Her sister Ruth was married to John Seward Johnson I, heir to the Johnson & Johnson fortune. Douglas’ father was from a prominent Bermudian family, present on the island since the early 17th century.  Her ancestry included English, Irish, Welsh, Dutch, Scottish, Belgian, and French. Douglas was brought up in the Church of England.

In 1942 Douglas began her career in a minor, uncredited role in Keeper of the Flame. She went on to appear in many films during the 1950s and 1960s, her most notable role[citation needed] being Susan Rogers in The Indian Fighter. During the 1960s and 1970s, she appeared in a variety of television programs (such as the General Electric Theater and Naked City), her best known television role being Lily Chernak Donnally on Love Is a Many Splendored Thing. She also played Poco on Three Steps to Heaven and Martha Evans in Days of Our Lives. Following the cancellation of Love Is a Many Splendored Thing, she played Annie (a role played in the motion picture by Coleen Dewhurst) in The Cowboys. She has also appeared in Roots: The Next Generations and on The Waltons.  In 1999, her autobiography In the Wings: A Memoir was published. In It Runs in the Family, Douglas appeared with her son Michael and grandson Cameron and later appeared in CBS’s Cold Case and the Season 15 ER episode “Heal Thyself” in 2008, the year that she retired from acting.

Douglas was married to Kirk Douglas, with whom she had studied acting before World War II. During the war, Douglas was serving in the U.S. Navy when he saw the May 3, 1943, issue of Life magazine, which featured a photograph of Dill on the cover. He showed the cover to his shipmates and said that he would marry her. The two were married on November 2, 1943. They had two sons, Michael and Joel, before divorcing in 1951.  She married actor Bill Darrid, and the couple lived with her sons on the East Coast of the United States until his death in 1992. In 2002 Douglas married Donald Webster in the old Devonshire Parish Church in Bermuda. On July 3, 2015, Douglas died in the Motion Picture & Television Country House and Hospital in Woodland Hills, Los Angeles of cancer at the age of 92.