Thompson was born in Washington, D.C., the daughter of Bettie Marshall (née Warner), a teacher, and Thomas Carlton Thompson, Jr., a lawyer. She received her early education in Washington. Thereafter she went to Cambridge, Massachusetts to attend Radcliffe College, Harvard University, and eventually graduating from Amherst College in English and classic literature in 1978.

Thompson moved to Los Angeles, supporting herself as a freelance book reviewer and writer. In 1983, she published a novel "First Born" which director Penelope Spheeris chose to make into a film, and from whom she started learning scriptwriting while writing the drafts of the film's screenplay. Though the movie was never made, the project gave her the impetus to find a new career as a screenwriter.

Her other works include Snow White for Hallmark, starring Miranda Richardson and Kristin Kreuk, The Secret Garden, Buddy, Black Beauty, The Incredible Journey, and The Addams Family.

From the above, she directed Black Beauty (1994) as her directorial debut, followed by Snow White in 2001 for TV and Buddy. She was the producer for Snow White and the associate producer for The Secret Garden and Edward Scissorhands.