Ontiveros was born Guadalupe Moreno in El Paso, Texas, to middle-class Mexican immigrants who overcame a lack of formal education to become owners of a tortilla factory and two restaurants in El Paso. She graduated from El Paso High School and went on to study at Texas Woman's University in Denton, Texas, where she received a bachelor's degree in social work. After her marriage, she and her husband moved to California to realize his dream of starting an automotive business. During a period of professional dissatisfaction with her social service career, Ontiveros was trying to decide whether to go back to school for a nursing degree when she saw an article about a need for local film "Extras." With her husband's encouragement, she began with that simple job and parlayed it into a long stage and screen career.

One of Ontiveros' most prominent early movie roles was in the 1983 Gregory Nava film El Norte, in which she played a seamstress and maid who acts as mentor to a newly arrived immigrant girl from Guatemala. In a 2004 interview with the Dominican newspaper Listín, she called El Norte "the film that always will remain in me... [it] tells the immigrants' story" when asked as to her favorite film from her long career. She played the housekeeper Rosalita, a Hispanic maid hired to assist in the packing and moving of the Walsh family in the hit adventure film The Goonies (1985) and a housekeeper in Dolly Dearest (1992).

The actress worked with Nava in subsequent films, including My Family/Mi Familia (1995) and Selena (1997). In the latter film, she portrayed the murderer of Tejano singer Selena, Yolanda Saldívar, the singer's fan-club president and has appeared in the Academy Award® winning film, As Good as It Gets.

In 2000, she was featured in the film Chuck & Buck, in which she played Beverly, a tough theater director who puts on a play written by one of the main characters. For that role, she was nominated for Best Supporting Actress in a Motion Picture in the 2000 Independent Spirit Awards.

She co-starred with America Ferrera in the 2002 film Real Women Have Curves and received excellent reviews that earned her and her co-star a Special Jury Prize at the prestigious Sundance Film Festival.