Wilkinson was born in Leeds, West Yorkshire, the son of Thomas Wilkinson, Sr., a farmer. At the age of four, he moved with his family to Canada, where they lived for several years before returning to England and running a pub in Cornwall.

Wilkinson graduated from the University of Kent, where he was a member of T24 Drama Society (then named UKCD) and attended the Royal Academy of Dramatic Art. Although the owner of several exotic properties around the world, Wilkinson currently lives in London with his wife, actress Diana Hardcastle, and his two children, Alice and Mollie.

Wilkinson made his television debut in the mid-1970s and worked on several British television series, first gaining critical acclaim with his appearance as Mr Pecksniff, in the BBC's 1994 adaptation of Martin Chuzzlewit. He made only the occasional film (including a brief appearance in 1995's Sense and Sensibility) until he became more prominent with The Full Monty in 1997.

That success was followed up by Oscar and Lucinda, Wilde, Shakespeare in Love, The Patriot, Eternal Sunshine of the Spotless Mind, Normal, The Exorcism of Emily Rose, Batman Begins, and Todd Field's In the Bedroom, for which he was nominated for the Academy Award for Best Actor, and Separate Lies. In 2007 Wilkinson played the manic depressive attorney Arthur Edens in Michael Clayton and garnered much critical acclaim and a nomination for the academy award for Best Supporting Actor.

He received a Doctor of Letters honorary degree from the University of Kent in July 2001. In the New Year Honours List published 31 December 2004, he was appointed an OBE for services to drama.

In 2008, Wilkinson portrayed American patriot Benjamin Franklin in the HBO mini-series John Adams. In the HBO movie, Recount, Wilkinson also portrays legendary American Statesman and lawyer, James A. Baker, in Baker's capacity as Chief Counsel to George W. Bush during the 2000 U.S. Presidential Election controversy. Both performances received Emmy Award nominations.