Varney was best known for his role as Ernest P. Worrell, featured in numerous commercials and movies. Varney was married twice, to Jacqueline Drew (1977–83) and Jane Varney (1988–91). Both marriages ended in divorce, though he remained friends with Jane until his death; she became his spokesperson and accompanied Jim to the Toy Story 2 premiere before he died. Varney had no children.
On February 10, 2000, after being a life-long heavy smoker, Jim Varney died at age 50 from lung cancer. He had passed away almost three months after the theatrical release of Toy Story 2. Before his death, Varney had completed two final movies, Daddy and Them and Atlantis: The Lost Empire. Both movies were released in 2001 and were both dedicated to him during the end credits. Those two and Toy Story 2 were the last three movies he was in. His good friend Blake Clark provided the voice of Slinky Dog in Toy Story 3.