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Thompson was born in North Bay, Ontario, and grew up in Brampton, Ontario. After graduating from the York University School of Drama, he became a member of The Kids in the Hall. That troupe's series aired on the CBC in Canada and on HBO in the United States, but moved to CBS for the fourth and fifth seasons.

Openly gay, he became the gay celebrity during the run of the show. Best-known for his monologues as the lisping Buddy Cole, he also acted regularly on The Larry Sanders Show and made numerous guest appearances on other television series.

In 2001, he debuted a one-man show in Toronto, The Lowest Show on Earth.