A chatty co-worker might do more than just drive you up the wall. Constant interruptions make getting work done more difficult and may cause your performance to suffer. Handle your talkative co-worker carefully. Alienating her could create a negative work environment and come back to haunt you later, when you need her help or cooperation to get your job done.
Use Honest Cues
Try handling the problem yourself by gently telling the co-worker that you have work to do and can't talk right now. Suggest alternate times for her speak to you, such as at lunch, or simply let her know you can't afford to fall behind or that you have an important project. If you're honest with her, she may realize that her chatter is affecting your work and change her habits. You may ignore her if she continues, but this approach can backfire if she feels you're being rude.
Prepare Exit Strategies
If cues don't work and you don't want to involve your boss yet, rotate through some polite excuses, such as "I need to step out for a minute." Your co-worker may get the hint or simply stop chatting once she realizes that you're going to cut her off. You may also try shifting the topic to something your co-worker isn't interested in.
Speak to Your Boss
If all else fails, ask your boss to step in. Explain the issue and what you've already tried. Suggest ways for your boss to handle it without directly identifying you. Ask your boss to send out an officewide memo about disruptive talking so your co-worker doesn't feel targeted -- but still gets the message. Your boss may choose to speak to your co-worker directly, so ask him to keep your name out of it.
Alternatives
Ask your manager whether you can relocate if you can't ignore your co-worker or get her to stay quiet. If you don't want to identity your co-worker as the reason, explain that the area in general is too loud and you'd prefer someplace quieter or with less traffic flow. If you're stuck in your spot for now, use other methods to deter your chatty coworker, such as asking her for help with something each time she stops to talk to you.