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Born in Toronto, Ontario, Sarah Polley is the youngest of five children born to Michael Polley, a British-born actor (he attended acting classes with Albert Finney in England before moving to Canada), and actress and casting director Diane Polley, who died of cancer just before Polley's 11th birthday. She attended Earl Haig Secondary School.

Her first cinematic appearance was at the age of four, as Molly in the Disney film One Magic Christmas. At age eight, she was cast in the title role in the television series Ramona, based on Beverly Cleary's books. Though the series lasted but one season, Polley burst into the public eye the following year as Sara Stanley on the popular CBC television series Road to Avonlea, produced by Kevin Sullivan. The series made her famous and financially independent, and she was hailed as "Canada's Sweetheart" by the popular press.

After seven years with the program, she became irate over the Americanization of the series after it was picked up by the Disney Channel for distribution in the U.S., eventually dropping out of the show. A short time later, the show itself was canceled (to which she publicly claimed indifference), although she did return as Sara Stanley for the final episode.

Her disenchantment with Disney was rooted in an incident during the Gulf War, when she was invited by Disney to appear at a Children's Awards Show in Washington, D.C. The 12-year-old Polley wore a peace symbol to the event, refusing requests from producers to take if off. She has reportedly been blacklisted by Disney since then.

Polley appeared as Lily on the CBC television series, Straight Up. It ran from 1996–1998 and she won the Gemini Award for Best Performance in a Children's or Youth Program or Series for her role. Polley's subsequent role as Nicole Burnell in the 1997 film The Sweet Hereafter, brought her considerable attention in the United States; she was a fan favourite at the Sundance Film Festival.

She was cast in the role of Penny Lane in the big-budget 2000 film Almost Famous, but dropped out of the project to return to Canada for the low-budget The Law of Enclosures. Her role in the 2003 film My Life Without Me, garned the Genie Award for Best Performance by an Actress in a Leading Role in 2004. In 2005 she starred in The Secret Life of Words, opposite Tim Robbins and Julie Christie. She was nominated as Best European Actress by the European Film Academy for her role as Hanna.[1]

She made her feature-length film directing debut with Away From Her, based on the Alice Munro short story The Bear Came Over the Mountain. The movie, starring Julie Christie, debuted at the Toronto International Film Festival on September 11, 2006 as part of the TIFF's Gala showcase. The movie drew rave revues from Variety, The Hollywood Reporter, and the three Toronto dailies, both for the performances of Christie and her co-star, Canadian actor Gordon Pinsent, and for Polley's direction.

Away From Her was acquired by Lionsgate for release in the US for the sum of $750,000. The distributor, which plans to release the film in the spring of 2007, is expected to launch a major campaign for Academy Award nominations, for Christie's performance and for Polley as writer-director.