Hoffman was born in Fairport, New York, the son of Marilyn L. O'Connor, a family court judge, lawyer, and civil rights activist, and Gordon S. Hoffman, a former Xerox executive. He has two sisters, Jill and Emily, and a brother, Gordy Hoffman,
Hoffman attended the 1984 Theater School at the New York State Summer School for the Arts. Hoffman received a BFA in drama in 1989 from New York University's Tisch School of the Arts.
Hoffman's first role was as a defendant in a 1991 episode of the television series Law & Order. He made his film breakthrough in 1992 when he appeared in four feature films, with the most successful film being Scent of a Woman.
Hoffman has established a successful and respected film career playing diverse and idiosyncratic characters in supporting roles, working with a wide variety of noted directors, including Paul Thomas Anderson, The Coen Brothers, Cameron Crowe, Spike Lee, David Mamet, Robert Benton, Todd Solondz and Anthony Minghella; notably, he has appeared in four out of five of Anderson's feature films to date (Hard Eight, Boogie Nights, Magnolia, and Punch-Drunk Love). It is notable that his roles in each successive Paul Thomas Anderson film is of increasing importance to the storyline.
Hoffman has continued to play supporting parts in such films as Cold Mountain, as a carnally obsessed preacher, Along Came Polly, as Ben Stiller's crude has-been actor buddy, and Mission: Impossible III, as villainous arms dealer Owen Davian out to kill Ethan Hunt. Hoffman has distinguished himself by playing a wide contrast of characters including gay characters (Boogie Nights, Flawless and Capote), lonely losers (Happiness), spoiled rich brats (Scent of a Woman, Patch Adams and The Talented Mr. Ripley), caring and nurturing figures (Magnolia and Almost Famous), vicious thugs (Punch-Drunk Love and Mission: Impossible III), sensitive artists (State and Main), an outlandish CIA officer (Charlie Wilson's War), and so on.
In 2005, Hoffman won widespread acclaim for his portrayal of writer Truman Capote in the film Capote. His performance received numerous high-profile accolades and awards, including the Academy Award for Best Actor, the Golden Globe Award for Best Actor - Motion Picture Drama, the Screen Actors Guild Award for Best Actor - Motion Picture, and the BAFTA Award for Best Actor in a Leading Role. In addition, he was also awarded Best Actor by at least ten film critic associations, including the National Board of Review, Toronto Film Critics, and Los Angeles Film Critics.
In 2007, Hoffman was nominated for the Golden Globe for Best Actor in a Supporting Role for playing Gust Avrakotos, a CIA officer who helps Congressman Charlie Wilson support a covert war in Afghanistan in the movie Charlie Wilson's War. In 2008, he was also nominated for Academy Award for Best Supporting Actor for the same role.
In addition to his television and film career, Hoffman has been recognized for his work in theater. He has twice been nominated for a Tony Award: as Best Actor (Play) in 2000 for a Broadway revival of Sam Shepard's True West opposite John C. Reilly, and for Best Actor (Featured Role - Play) in 2003 for a revival of Eugene O'Neill's Long Day's Journey into Night. In 1999, he also starred in Richard Greenberg's one-act play, The Author's Voice, in New York. Hoffman has also distinguished himself as a director with off-Broadway projects such as Rebecca Gilman's The Glory of Living at the MCC Theater, and Stephen Adly Guirgis's Jesus Hopped the A Train, The Last Days of Judas Iscariot, and The Little Flower of East Orange. Hoffman is co-artistic director of New York City's LAByrinth Theater Company, along with actor John Ortiz.
Hoffman is in a relationship with costume designer Mimi O'Donnell. They met while working on the 1999 play "In Arabia We'd All Be Kings," which Hoffman directed. They have a son, Cooper Alexander, born in March 2003, and a daughter, Tallulah, born in November 2006.