Boothe was born in Snyder, Texas to Merrill Vestal Boothe and Emily Kathryn Reeves. He attended Texas State University-San Marcos as an undergraduate, and received his Master of Fine Arts from Southern Methodist University in 1972. After graduation, Boothe joined the repertory company of the Oregon Shakespeare Festival, with roles in Henry IV, Part 2 (portraying Henry IV of England) and Troilus and Cressida, among others.

His New York stage debut was in the 1974 Lincoln Center production of Richard III. Five years later, his Broadway theatre debut came in a starring role in the one-act play Lone Star, written by James McLure. Boothe first came to national attention in 1980, playing Jim Jones in the CBS-TV movie Guyana Tragedy: The Story of Jim Jones. Boothe's portrayal of the crazed cult leader received critical acclaim. In Time's story on the production, Boothe was praised: "There is one extraordinary performance. A young actor named Powers Boothe captures all the charisma and evil of 'Dad', Jim Jones."

Boothe won the Emmy Award for his role, beating out veterans Henry Fonda and Jason Robards. During the Screen Actors Guild strike in the fall of 1980, he was one of the few who showed up at the ceremonies to claim his prize. He said at the time, "This may be either the bravest moment of my career or the dumbest."

Boothe joined the ranks of Humphrey Bogart and other actors when he portrayed Philip Marlowe in a series of short films for HBO in the 1980s. He gave several fine performances in films like Southern Comfort, A Breed Apart, Red Dawn, The Emerald Forest, Nixon (where he played Chief of Staff Alexander Haig), and Extreme Prejudice, as well as HBO films like Into The Homeland and By Dawn's Early Light. However, his most lauded subsequent performance was in the 1990 CBS-TV film Family of Spies where he played traitor Navy Officer John Walker. Boothe also portrayed Curly Bill Brocius in Tombstone, as well as the disloyal senior Army officer in Blue Sky (opposite Jessica Lange's Oscar-winning performance).

In 2001, he has also starred as Flavius A�tius, the Roman general in charge of stopping the Hun invasion in the made for TV mini-series, Attila, which critics and fans of the actor consider to be an excellent performance. Most recently, Boothe has played a featured role as brothel-owner Cy Tolliver on the HBO series Deadwood, and the seedy Senator Roark in the motion picture Sin City. He is the voice of one of the characters in the 2005 video game Area 51 and Gorilla Grodd, the leader of the Legion of Doom in Justice League Unlimited.