Palmer was born Patricia Betsy Hrunek in East Chicago, Indiana, the daughter of Marie (née Love), who headed the Chicago Business College, and Vincent R. Hrunek, an industrial chemist who was an immigrant from Czechoslovakia. She graduated from DePaul University. Palmer married Dr. Vincent J. Merendino on May 8, 1954; the couple had one daughter, Missy (b. 1962). They divorced in 1971.
Palmer got her first acting job in 1951 when she joined the cast of a 15 minute long, daily soap opera, Miss Susan, which was produced in Philadelphia. She was "discovered" for this role while enjoying a party in the apartment of actor Frank Sutton (Gunnery Sergeant Vince Carter of Gomer Pyle, U.S.M.C.). She had been in New York City less than one week.
A life member of The Actors Studio, Palmer's stage work included a tour of South Pacific (as Nellie Forbush) and the title role inMaggie, a 1953 musicalization of What Every Woman Knows.
She would later become a familiar face on television as a long-running regular panelist on the quiz show I've Got a Secret. She joined the show's original run, replacing Faye Emerson in 1958 and remaining until the show's finale in 1967. She did not subsequently reprise her role in any of the various revivals of the show.
Palmer appeared as Kitty Carter in The Long Gray Line (1955), starring Tyrone Power and Maureen O'Hara. She also played nurse Lt. Ann Girard (the main female character) in the all-star cast of the classic film Mister Roberts (1955), which starred Henry Fonda, Jack Lemmon, and James Cagney. She also played Carol Lee Phillips in the film Queen Bee (1956), which starred Joan Crawford.
Palmer starred alongside Fonda again as well as Anthony Perkins in the Paramount production of The Tin Star (1957), a Western that was nominated for an Academy Award for Best Writing, Story or Screenplay.
In 1958, she played an undercover agent Phyllis Carter/Lynn Stuart in the film The True Story of Lynn Stuart, co-starring Jack Lord and featuring Kim Spalding as her husband, Ralph Carter.
Palmer's need to purchase a new car was her reason for taking her most famous role in Friday the 13th. She recounted, in an interview, that her initial reaction to the experience was: "What a piece of shit! Nobody is ever going to see this thing." Despite her distaste for the film, she consented to a cameo appearance in Friday the 13th Part 2. She ultimately came to embrace her participation in the films since it made her more famous rather than infamous, appearing in the 2006 documentary Betsy Palmer: A Scream Queen Legend. Palmer was asked to reprise her role as Mrs. Voorhees in Freddy vs. Jason in 2003, but turned it down, reportedly due to the low remuneration she was offered.
Palmer created the role of "Suz Becker" on the CBS daytime soap opera As the World Turns. From 1991 to 1992, the actress appeared on Knots Landing as Virginia "Ginny" Bullock, the aunt of Valene Ewing (played by series star Joan Van Ark).
She acted in a Mayfield Dinner Theatre production of On Golden Pond in Edmonton, Alberta in 1997. In 2005, she appeared in the horror short Penny Dreadful and in 2007 as the older version of the title character in Waltzing Anna. She provided the voice of the title character, the ghost of a witch, in the 2007 horror film Bell Witch: The Movie.