After a long relationship with Martin Scorsese, Douglas married Jonathan Axelrod, son of Hollywood producer George Axelrod in 1998. They divorced three years later. She is known for her part in Martin Scorsese's Cape Fear (1991), her role as singer/songwriter Denise Waverly in Allison Anders' Grace of My Heart (1996), and her roles in To Die For (1995) and Ghost World (2001).
On TV, Douglas appeared briefly as Garry Shandling's love interest on The Larry Sanders Show, starred in the series Action (1999) with Jay Mohr, guest starred on both Seinfeld and Frasier and has played a public defender on several episodes of Law & Order: Special Victims Unit in 2002 and 2003. She appeared in two episodes of the critically acclaimed HBO TV-series Six Feet Under, both of which earned Emmy nominations for Guest Actress in a Drama. In 2006 she starred in the Lifetime TV Movie Not Like Everyone Else. In 2007 Douglas was added to the cast of Ugly Betty, where she plays Sheila, an editor for MODE magazine.
At the Walt Disney World Resort in the Disney's Hollywood Studios theme park, Douglas plays Aerosmith's manager in the preshow video for the Rock 'n' Roller Coaster attraction. She later appeared in an Aerosmith music video as Liv Tyler's mother.
Douglas has tried her hand at writing and directing, with a comedy short The Perfect Woman (1993), the documentary Everybody Just Stay Calm--Stories in Independent Filmmaking (1994), and the satire Boy Crazy, Girl Crazier (1995); and she has been the producer for several projects including Illeanarama, a collection of her short films for the Sundance Channel.