Atwood has been nominated for the Academy Award for Best Costume Design twelve times, winning four times; for the films Chicago (2002), Memoirs of a Geisha (2005), Alice in Wonderland (2010), and Fantastic Beasts and Where to Find Them (2016). Atwood has collaborated several times with directors Tim Burton, Rob Marshall and Jonathan Demme.

Atwood began her career as a fashion advisor in Washington in the early 1970. She moved to New York in 1980, where she studied art at New York University. Her movie career started after a chance encounter with someone whose mother was designing the sets for the film Ragtime, and she got the job of a PA (production assistant) in the film. She worked as an assistant to a costume designer and eventually earned her first film credit for A Little Sex, directed by Bruce Paltrow.

Eventually Atwood ventured into the world of costume design for theater and film, initially coming to fame through her work on Sting's Bring on the Night World Tour, also made into a documentary by the same name. An important turning point in her career came when, through the production designer (Bo Welch) with whom she had worked in Joe Versus the Volcano, she met director Tim Burton. Atwood and Burton worked together on over seven films in the next two decades, starting with Edward Scissorhands and including Sleepy Hollow, Ed Wood, Big Fish, Planet of the Apes, and Sweeney Todd. She moved to Los Angeles in 1990.

Atwood has been partially involved in developing or has been the lead designer for producing the costumes on over 50 films to date. She was the lead costume designer for all the new costumes created for Ringling Bros. and Barnum & Bailey Circus in 2005-2006. She also designed The Black Parade band uniforms for the band My Chemical Romance, as well as costumes for the following album, Danger Days: The True Lives of the Fabulous Killjoys. She also designs for television, including Arrow, The Flash, and the new Supergirl series.

Atwood's favorite fashion designers include Azzedine Alaia., Yohji Yamamoto and Alexander McQueen