Grace was born in New York City, New York to John Grace (a Connecticut-based business executive) and Patricia (an office worker and assistant to the schoolmaster of the New Canaan Country School in New Canaan, Connecticut); he has a sister, Jenny. Grace grew up in Darien, Connecticut, where he knew actress Kate Bosworth and was sometimes babysat by actress Chloe Sevigny, who also later appeared with him in high school stage plays. He chose to go by the name Topher in high school, after becoming frustrated with his full name being abbreviated as Chris, so he dropped the Chris and kept the Topher. However, it has also been stated that his little brother couldn't pronounce "Christopher" and said "Topher" instead.
Grace attended the Fay School in Southborough, Massachusetts and Brewster Academy in Wolfeboro, New Hampshire, where he was noticed by the producer of That '70s Show (whose daughter also attended the school) while playing the leading role of Pseudolus in a local stage production of A Funny Thing Happened on the Way to the Forum.
Grace was cast as Eric Forman on Fox's That '70s Show, which debuted in 1998. The sitcom was successful and Grace became well known among television watchers; he played the role until 2005, after which he left the series in order to pursue feature film work. The series was renewed for another season despite his absence before its cancellation in 2006. Grace would make a guest appearance in the last episode.
Grace briefly attended college at the University of Southern California, but left during his freshman year to concentrate on his television work and to pursue a career in film. He played a prep school drug addict in director Steven Soderbergh's Traffic (2000), as well as having uncredited cameos in Soderbergh's Ocean's Eleven (2001) and Ocean's Twelve (2004). He also appeared in director Mike Newell's Mona Lisa Smile (2003).
In 2004, Grace had the starring role in two major feature films; he played the leading roles in the Robert Luketic directed Win a Date with Tad Hamilton! and the Paul Weitz dramedy, In Good Company, in which he played an ambitious but troubled corporate executive. In the same year, Grace also starred the film, P.S., which received only a limited theatrical release.
Grace's work in P.S. and In Good Company was recognized by the National Board of Review of Motion Pictures in the category of "Breakthrough Performance by an Actor". In 2005, Grace hosted Saturday Night Live. He is currently filming a role in Spider-Man 3, directed by Sam Raimi. Raimi said Grace's role in Spider-Man 3 would contrast the good-natured comedic roles he has played in the past. He will be portraying Edward "Eddie" Brock, Junior, who later becomes the malevolent Venom, a fan-favorite Spider-Man villain.
Grace will soon also star in The Crusaders, a drama about the 1954 Brown v. Board of Education decision. He will play real-life civil rights lawyer Jack Greenberg, opposite Terrence Howard, who will play Thurgood Marshall