Schafer was born in Red Bank, New Jersey, the eldest child of Jennie Elizabeth (née Tim) and Charles Emanual Schafer. Her family was German Jewish. She began her career as an actress on Broadway before moving to Los Angeles in 1941 to work in films.  Schafer appeared on Broadway in seventeen plays between 1927 and 1959, often playing supporting roles. Most of these appearances were in short-run plays, with the exceptions of Lady in the Dark (1941–1942), The Doughgirls (1942–1944), and Romanoff and Juliet (1957–1958). She was also seen in a revival of Six Characters in Search of an Author, directed by Sir Tyrone Guthrie (1955–1956). She also appeared in stock and regional productions of plays.  Schafer appeared in many films, usually portraying beautiful sophisticates, but she is best known for the situation comedy Gilligan’s Island, playing the role of the millionaire’s wife, Eunice “Lovey” Wentworth Howell. She reprised her role in the made-for-TV spin-off films that were made after the show’s demise, along with the animated spinoff, Gilligan’s Planet, in 1982. Originally written as a humorless grande dame, Schafer worked with the writers to create a character not unlike the scatterbrain roles played in 1930s films by Mary Boland and Billie Burke. Schafer specifically suggested that the writers read the George S. Kaufman–Marc Connelly play Dulcy for its dizzy title-character.  She was a guest star on many television series, including Goodyear Playhouse/Philco Playhouse: (The Sisters, with Grace Kelly, 1951), I Love Lucy (1954), Producers’ Showcase (The Petrified Forest, with Lauren Bacall, Humphrey Bogart, and Henry Fonda, 1955), Guestward, Ho! (1960), The Beverly Hillbillies (1964), Mayberry RFD (1970), The Brady Bunch (1974), Three’s Company’, ‘The Love Boat and Phyllis (1976). In 1971–72, Schafer joined the cast of the CBS daytime-serial, Search for Tomorrow as Helen Collins, the mother of characters Wade and Clay Collins. Immediately following, she played Augusta Roulland on another daytime soap, Love of Life. Her final performance was given in 1990, in the television film I’m Dangerous Tonight, opposite Anthony Perkins and Corey Parker. The actress also guest-starred, opposite William Shatner, on 1960’s Thriller in its first season.

Schafer was married to actor Louis Calhern from 1934 to 1942; they had no children. Long after their divorce, the two appeared together in the 1956 film Forever, Darling. During much of the 1940s and 1950s she was romantically linked to author and playwright George S. Kaufman.  Schafer was legendarily secretive about her age, never even telling Calhern. 1912 was generally given as her birth year for many years, which few believed, yet her actual year of birth (which was not discovered until after her death) of 1900 shocked even her intimate friends. She was also a breast cancer survivor, a fact she withheld from her fans and friends.  Her investments, particularly in real estate, made her a multi-millionaire. Differing sources state that most of this fortune was bequeathed to either her Gilligan’s Island co-star Dawn Wells, or to care for her dogs (Wells has not commented). Wells did reveal on the talk show Vicki!, starring Vicki Lawrence, that Schafer spent her last years living with her Gilligan’s Island co-star, with Wells as her caretaker. Wells also revealed that one of Schafer’s favorite things on Gilligan’s Island was “falling through quicksand.” The Los Angeles Times reported that Schafer bequeathed two million dollars to the Motion Picture and Television Hospital; the money was used to renovate the hospital’s outpatient wing, which was renamed the “Natalie Schafer Wing.”  Schafer died of cancer in her Beverly Hills home, at the age of 90. She was cremated; her ashes were scattered into the Pacific Ocean, off San Pedro’s Point Fermin Light, in California.  Upon her death, she left over $1.5 million to the Lillian Booth Actors Home and in 1993, a wing was named in her honor.