Steadman was born in Liverpool, Merseyside, England, the daughter of Marjorie (n?e Evans) and George Percival Steadman, who worked for an electronics firm as a production controller. She moved to London in her twenties and enrolled in the East 15 Acting School, where she met Mike Leigh. They married in 1973 and had two sons, Toby in 1979 and Leo in 1981. They separated in 1995 and divorced in 2001. Her present partner is Michael Elwyn and she currently lives in Highgate, London.

She created the role of the monstrous Beverly in Mike Leigh's Abigail's Party, which she reprised with the original cast on television. Steadman also appeared in The Rise and Fall of Little Voice, The Prime of Miss Jean Brodie, Cat on a Hot Tin Roof, Entertaining Mr Sloane, Hotel Paradiso, and others in locations as diverse as the Royal Court, the Theatre Royal, the Old Vic, the Hampstead Theatre, the Nottingham Playhouse, the Everyman Liverpool and the National Theatre. She starred as Elmire in the 1983 RSC production of Moli?re's Tartuffe, which was adapted for BBC television. In 2010, Steadman was cast as Madame Arcati in a revival of No?l Coward's Blithe Spirit, which is scheduled for a national tour from November 2010 to March 2011.

Alison Steadman was born in Liverpool, England on 26 August 1946.