Varney was best known for his role as Ernest P. Worrell, featured in numerous commercials and films. 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 him to the Toy Story 2 premiere before he died. Varney had no children.
On February 10, 2000, after being a life-long heavy smoker, Varney died at his home in White House, Tennessee of lung cancer at the age of 50. He had passed away almost 3 months after the theatrical release of Toy Story 2. He was buried in Lexington Cemetery in Lexington, Kentucky. Before his death, Varney had completed two final films: Daddy and Them and Atlantis: The Lost Empire. Both films were released in 2001 and were both dedicated to him during the end credits. Those two and Toy Story 2 were the last three films he was in. His good friend Blake Clark took over as the voice of Slinky Dog since Toy Story 3.