The third actor of this name in a family of actors and managers, Jefferson completely eclipsed his forebears. He made his stage debut at the age of three in Kotzebue's Pizarro, and, after years of struggle as a traveling actor and manager, Jefferson achieved his first important success in Tom Taylor's Our American Cousin (1858), a play that was the turning point in his career. Other plays acted by Jefferson in those years included Dion Boucicault's Octoroon (1859), but his Bob Acres in The Rivals by Richard Sheridan, although very successful, was more Jefferson's creation than the author's.

In 1859 Jefferson made a stage adaptation of Washington Irving's Rip Van Winkle, which was only moderately successful. While in England in 1865 he commissioned Boucicault to write another version, and this, along with minor improvements incorporated over the years, was the final one. As Rip, Jefferson delighted London audiences for 170 consecutive nights, and he brought the play to America in 1866. After 1865 he created no new roles, as his public never tired of the delightful and sensitive characterization of Rip. He did, however, revive earlier plays in which he had appeared. Through the last third of the 19th century Jefferson remained at a peak of popularity.

The friend of many leading figures in politics, art, and literature, Jefferson brought dignity to the stage. He was awarded the lifetime honour of the presidency of the Players' club, succeeding Edwin Booth and preceding John Drew. His first wife was the actress Margaret Clements Lockyer, and his second was Sarah Warren, niece of the actor William Warren. Jefferson's Autobiography (1890) is written with spirit and humour, and its judgments with regard to the art of the actor and the playwright place it beside Colley Cibber's Apology.