Anderson was born in Berkeley, California. Her show business career began when a dance teacher urged her parents to find an agent for her. She began doing TV commercials, and soon she was in demand for television roles. One of those included that of Millicent, the girl who kissed Bobby and induced him to see fireworks on The Brady Bunch. At age eleven, she won her role in Little House on the Prairie ahead of hundreds of competitors. She left the series in 1982. She continued acting in television shows, such as The Equalizer, Alfred Hitchcock Presents, and Murder, She Wrote.

She has been described as mild mannered and unpretentious, similar to her Mary Ingalls character. Her first publicly known romance was with actor Lorenzo Lamas, with whom she made an appearance in the film series The Love Boat in which two friends (Lorenzo and Melissa) resist the matchmaking efforts of their parents. After this short romance, she dated Frank Sinatra, Jr., who at the time was more than twice her age. She says, "It was fun, but never really wild. That's just not me."[citation needed]

She won an Emmy Award for her performance in Which Mother Is Mine?, an ABC Afterschool Special (1979), and was nominated for a 1978 Primetime Emmy Award for Best Leading Actress in a Drama Series for her work on Little House on the Prairie. In 1976, Michael Landon asked Anderson if she would appear in his autobiographical film,The Loneliest Runner. Anderson agreed to play Nancy Rizzi, his first girlfriend, saying she was very thrilled to have been asked. She also secured a Spanish 'TP de Oro' Award for 'Best Foreign Actress' for Little House (1980). She was the associate producer for the next to last TV project Michael Landon made before dying: Where Pigeons Go to Die (1990).

She has a star on the Hollywood Walk of Fame. In 1998, she was inducted into the Western Performers Hall of Fame at the National Cowboy & Western Heritage Museum in Oklahoma City, Oklahoma.

With husband Michael Sloan, she has two children, daughter Piper (born February 1991) and son Griffin (born June 1996).

She has lived in Montreal, Quebec, Canada since 2002.