She studied briefly at the University of New South Wales before transferring to Australia's national Institute of Dramatic Art, graduating in 1971.
Stephenson began acting on television by 1972.In 1973–74, she starred as Julie King on the Australian TV series Ryan.After numerous television and film appearances, she had another recurring role as Iris Reade in the UK series Funny Man (1981).Probably her most widely recognized television role was in the classic 1980s UK comedy television sketch show Not The Nine O'Clock News, alongside Rowan Atkinson, Mel Smith and Griff Rhys Jones (1979–82).Stephenson acted in a number of films, including Private Collection, Superman III, Scandalous with John Gielgud, Bloodbath at the House of Death, Mel Brooks's History of the World, Part 1, and Stand Up, Virgin Soldiers.
As an actress and comediene she is perhaps best known for various roles on the class BBC sketch show 'Not the Nine O'Clock News'.
In 2010 she took part as a contestant on BBC's hugely popular dance show 'Strictly Come Dancing'.
In the United Kingdom general election, 1987, Pamela stood in the Windsor and Maidenhead constituency representing the "Stuff Pink Blancmange down Terry Wogan's Trousers Party" - she came 6th with 328 votes.