Varsi was born in San Mateo, California, a suburb of San Francisco. There she unsuccessfully tried to become a model and a restaurant hostess. While in high school, she was called an “oddball” by her classmates. She often played truant from school to visit San Francisco and was therefore labeled a “rebel”. She dropped out of school in her junior year at age 15, failing in all studies and saying: “I was bored. I didn’t like the social sides – the cliques.” Around the same time, she married an 18-year-old man. Their marriage was annulled before her son, Shawn, was born.  She joined the San Francisco ballet in the 1950s and initially planned on becoming a folk singer. She later hitchhiked to Los Angeles with a friend.  Despite having only experience as an actress in a stage production of Gigi, she made her screen debut at age 18 as Allison MacKenzie in Peyton Place (1957), receiving an Academy Award nomination for an Best Supporting Actress for her performance. The following year, Varsi shared the Golden Globe Award for New Star Of The Year – Actress with Sandra Dee and Carolyn Jones. Several famous actresses were tested for the main role in the big-budget film, until the then-unknown Varsi was cast in May 1957. She was discovered by producer Buddy Adler, who immediately put her under contract of 20th Century Fox.  By the time she was cast, Varsi already had an agent and had been searching for film roles for a long while, without any luck. She made rounds at several studios, but according to the actress, they all thought she was suitable for character parts only. She was even dropped by her agent in 1956, because he saw no future in her career.  Even before Peyton Place was released, Adler cast Varsi opposite Don Murray in the western From Hell to Texas (1958). She appeared in the films Ten North Frederick (1958) and Compulsion (1959). While filming Ten North Frederick, Varsi suffered a nervous breakdown, collapsed and was hospitalized. She later said: “I’m still trying to find myself. It’s still hard for me to separate illusion from reality… I don’t know whether acting is the form of creativity best for me.”

Varsi rejected the role of Meg in the comedy film Holiday for Lovers in January 1959. On March 18, 1959, she suddenly left Hollywood, abandoning her contract. She commented on this by saying: “I’m running away from destruction.” She refused to reveal her motives for leaving the industry, explaining it concerned other people as well. However, a week after leaving she stated: “Hollywood is too impressed with superficial cheapness.” Nevertheless, her contract with Fox did not expire until 1965. Her sudden walkout was for a long time rumoured to be a publicity stunt to promote the sequel to Peyton Place, Return to Peyton Place (1961), to which Varsi was a long time attached. By walking out of her contract, Varsi’s participation or consideration to several films were cancelled, including a starring role in The Best of Everything (1959). After leaving Hollywood, Varsi played in several small plays in San Francisco. At some point thereafter, she made her way to New York long enough to successfully audition for the Actors Studio, which she would attend at least briefly in 1965. As a result of being released from her contract, Varsi returned to film acting in the late 1960s, but by this time she was no longer being offered major film roles. She called the films she made in this period “cheap films of little merit”. She furthermore said that although producers were curious, they would not hire her. Her later films include Johnny Got His Gun in 1971, a film which Varsi described as her favorite, and a 1972 ABC-TV “Movie of the Week”, titled The People. Of Johnny Got His Gun, the actress said: “This is the kind of thing I always wanted to do. It comes very late to me. It’s been a long time to wait.” She was nervous to play the role, saying: “I felt too inadequate to do [Johnny Got His Gun]. It’s so intense, the responsibility.”

While in Hollywood, Varsi was known for being unglamorous, never wearing any make-up or fancy clothes. Furthermore, she avoided the Hollywood parties and was quoted saying: “I’d rather meet Aldous Huxley than Clark Gable.” Other actors at Fox recalled her as “a frightened, birdlike girl who was bewildered by her sudden success” and as “disillusioned by the way certain studio officials treated her”. Russ Tamblyn, her co-star in Peyton Place, stated they dated following the film’s release.  From November 26, 1956, to August 29, 1958, Varsi was married to James Dickson, whom she made her manager while working as an actress. She was married to Michael Hausman on May 21, 1961; they had a daughter, Willo.  In 1968, while working on the set of Wild in the Streets, Varsi suffered extreme trauma to her cervical spine, which led to years of misdiagnosed pain. In 1977, she contracted Lyme disease and lived for five years with undiagnosed and unremitting meningitis which brought her close to death several times. The Lyme disease, combined with her neck injury, which had resulted from numerous surgeries, was not diagnosed until 1989.  On November 19, 1992, Varsi died from respiratory failure at the age of 54 in Los Angeles. At the time of her death, she also had Lyme disease. She is buried in Mount Tamalpais Cemetery in San Rafael, California.