Born in Utica, New York to Italian-Americans Joseph and Virginia Funicello, she took dancing and music lessons as a child to try to overcome shyness. Her family moved to Southern California when she was four years old.

In 1955, the 12-year-old was discovered by Walt Disney as she performed as the Swan Queen in Swan Lake at a dance recital in Burbank, California. On the basis of this appearance, Disney cast her as one of the original "Mouseketeers". She was the last to be selected, and the only one picked by Walt Disney. She soon proved to be very popular. By the end of the first season of Mickey Mouse Club, she was receiving 6,000 letters a month, according to her Disney Legends biography.

In addition to appearing in many of the Mouseketeers' sketches and dance routines, Funicello starred or co-starred in a number of serials on The Mickey Mouse Club. These included Adventure in Dairyland, her own self-titled serial, Walt Disney Presents: Annette (which co-starred Richard Deacon), and the second and third Spin and Marty serials,The Further Adventures of Spin and Marty and The New Adventures of Spin and Marty. It was in a hayride scene in the Annette serial that she performed the song that was to launch her singing career. The studio received so much fan mail about "How Will I Know My Love," written by the Sherman Brothers, that Walt Disney decided to issue it as a single, and to give Funicello, somewhat unwillingly, a recording contract.

After the Mickey Mouse Club she remained under contract with Disney for a time, with television roles in Zorro, Elfego Baca and The Horsemasters. For Zorro she played Anita Cabrillo in a three-episode storyline about a teen-aged girl who arrives in Los Angeles to visit a father who does not seem to exist. This role was reportedly a birthday present from Walt Disney, and the first of two different characters played opposite Guy Williams as Zorro. Annette also co-starred in Disney-produced movies such as The Shaggy Dog, Babes in Toyland, The Misadventures of Merlin Jones, and The Monkey's Uncle.

Although uncomfortable being thought of as a singer, Annette had a number of pop record hits in the late 1950s and early 1960s, mostly written by the Sherman Brothers and including: "Tall Paul," "First Name Initial," "O Dio Mio," "Train of Love" (written by Paul Anka) and "Pineapple Princess." They were released by Disney's Buena Vista label. Annette also recorded "It's Really Love" in 1959, a reworking of an earlier Paul Anka song called "Toot Sweet"; Anka reworked the song for a third time in 1962 as "Johnny's Theme" and it opened The Tonight Show Starring Johnny Carson on television for the next three decades. In an episode of the Disney anthology television series titled "Disneyland After Dark," Annette can be seen singing live at Disneyland. Walt Disney was reportedly a fan of 1950s pop star Teresa Brewer and tried to pattern Annette's singing in the same style. However, Funicello credits "the Annette sound" to her record producer, Tutti Camarata, who worked for Disney in that era. Camarata had her double-track her vocals, matching her first track as closely as possible on the second recording to achieve a fuller sound than her voice would otherwise produce. Early in her career, she appeared on the NBC interview program Here's Hollywood.

After maturing, she moved on from Disney and became a teen idol, starring in a series of "Beach Party" movies with Frankie Avalon for American International Pictures. These included Beach Party, Muscle Beach Party, Bikini Beach, Beach Blanket Bingo, How to Stuff a Wild Bikini and Pajama Party.

When she was cast in her first beach movie, Walt Disney reportedly requested that she only wear modest bathing suits and keep her navel hidden. However, Annette wore a pink two-piece in Beach Party, a white two-piece fishnet suit in the second film (Muscle Beach Party) and a blue and white bikini in the third (Bikini Beach). All three swimsuits showed her navel, particularly in Bikini Beach, where it is visible extensively during close up shots in a sequence early in the film when she meets Frankie Avalon's "Potato Bug" character outside his tent.

She and Avalon became so iconic as "beach picture" stars that they were re-united in 1987 for the Paramount film Back to the Beach, parodying their own surf-and-sand films of two decades earlier. They then toured the country as a singing act.

In 1979, Funicello began starring in a series of television commercials for Skippy peanut butter.

Funicello was married to her first husband, Jack Gilardi, from 1965 until 1981. They had three children together, Gina (b. 1966), Jack, Jr. (b. 1970) and Jason (b. 1974). In 1986, she married California harness racing horse breeder/trainer Glen Holt. Annette and Glen were frequently seen at Los Alamitos Race Course and at Fairplex in Pomona in the 1980s and 1990s attending harness horse races. In 1987, Annette reunited with Frankie Avalon for a series of promotional concerts to promote their film Back to the Beach. She began to suffer from dizzy spells, but kept her failing health from her family.