Balsam was born in New York City in 1959 (though some sources erroneously give 1960) to actor Martin Balsam and Actress Joyce Van Patten. Her ancestry includes Russian-Jewish, Italian, Dutch, and English. She is the niece of actor Dick Van Patten, Actress Pat Van Patten and actor and Director Tim Van Patten.
Balsam married actor George Clooney in Las Vegas in 1989; they were divorced in 1993. Clooney stated, "I probably – definitely – wasn't someone who should have been married at that point." Clooney told Vanity Fair, "I just don't feel like I gave Talia a fair shot." Since 1998 Balsam has been married to John Slattery with whom she has a son, Harry Slattery. They married at the county of Kauai. Together, they played husband and wife Roger and Mona Sterling in Mad Men.