Gorney's father is Jay Gorney, who was born in Białystok, Poland, and was a composer who wrote the music for the song about America's Great Depression, "Brother, Can You Spare a Dime?" Her family is Jewish. She earned a Bachelor of Fine Arts degree from Carnegie Mellon University and a Master of Fine Arts from Brandeis University. Karen is the sister of Daniel Gorney, and half-sister of author, professor, and physician Roderic Gorney, who has taught for many years at UCLA.
Gorney made her film debut as a teenage resident of a mental health treatment center in David and Lisa (1962). Her next work on the big screen came in 1970 with the film The Magic Garden of Stanley Sweetheart. From 1970 to 1974, Gorney played the role of Tara Martin on the soap opera All My Children. After she left the show, Gorney had agreed to return when her replacement, actress/writer Stephanie Braxton, decided to leave the show. She returned for the 1976–1977 season but was eventually fired as Tara and did not return to the show until almost 20 years later.
In 1977, Gorney co-starred in her third film, and biggest role to date, as Stephanie Mangano in Saturday Night Fever, alongside John Travolta. The next year, she appeared as a celebrity panelist on Hollywood Squares.

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