Following The October Game's first concert at Dalhousie University, McLachlan was offered a recording contract with Vancouver based independent record label Nettwerk. McLachlan's parents convinced her to finish her studies at the Nova Scotia College of Art and Design before embarking on a new life as a recording artist. She was signed to Nettwerk before having written a single song.

The signing prompted McLachlan to move to Vancouver, British Columbia. There she recorded the first of her albums, Touch, in 1988, which received both critical and commercial success and included the hit song "Vox". During this period she also contributed to an album by Moev, and embarked on her first national concert tour as an opening act for The Grapes of Wrath.

Her 1991 album, Solace, was her mainstream breakthrough in Canada, spawning the hit singles "The Path of Thorns (Terms)" and "Into the Fire".

1993's Fumbling Towards Ecstasy was an immediate smash hit in Canada. From her Nettwerk connection, her piano version of the song Possession was included on the first Due South television series soundtrack in 1996. Over the next two years, Fumbling Towards Ecstasy quietly became McLachlan's international breakthrough as well, scaling the charts in a number of countries and setting the stage for 1997's Surfacing, which debuted at the top of the charts amid the hype around Lilith Fair. The McLachlan-founded Lilith Fair tour brought together 2 million people over its three-year history and raised more than $7 million for charities. It was the most successful all-female music festival in history, one of the biggest music festivals of the 1990s, and helped launch the careers of several well-known female artists.

McLachlan has been extensively profiled by media including cover stories for Rolling Stone, Time magazine and Entertainment Weekly. She was awarded the Elizabeth Cady Stanton Visionary Award in 1998 for advancing the careers of women in music.

On February 7, 1997, she married Ashwin Sood, her long-time drummer, in Negril, Jamaica. In 1998, she performed three songs with the legendary rock band Phish at the annual Bridge School Benefit concert in California, hosted by Neil Young, after which McLachlan began an extended period away from recording or touring. She did, however, participate in the 2002 British Columbia Cancer Foundation Benefit Concert in memory of cancer victim Michele Bourbonnais. She participated along with four other Canadian artists, Bryan Adams, Jann Arden, Barenaked Ladies, and Chantal Kreviazuk.

She returned to public life and touring with her 2003 album release, Afterglow, although she has no current plans to resurrect Lilith Fair.

Known for the emotional sound of her ballads, some of her popular songs include "Angel", "Building a Mystery", "Adia", "Possession", "I Will Remember You" and "Into the Fire". Her best-selling album to date is Surfacing, for which she won multiple Grammy Awards and four Juno Awards (Canada's equivalent to the Grammy's). Through her career, she has also received many other awards, primarily in recognition of her efforts in launching Lilith Fair. In 1999, she was appointed as an Officer of the Order of Canada in recognition of her successful recording career, her role in Lilith Fair, and the charitable donations she made to women's shelters across Canada. McLachlan also funds an outreach program in Vancouver that provides music education for inner city children. In 2001, she was awarded the Order of British Columbia.

During McLachlan's hiatus in her recording career, she lost her mother to cancer in December 2001, while McLachlan herself was pregnant. McLachlan gave birth to a daughter named India on April 6, 2002, in Vancouver. McLachlan had already completed three-quarters of the Afterglow record production. In May 2002, her duet with Bryan Adams was released on the Spirit: Stallion of the Cimarron soundtrack. She sang harmonies and played the piano on the song "Don't Let Go" while Sood did the drum work.

In early 2005 McLachlan took part in a star-studded tsunami disaster relief telethon on NBC. On January 29 McLachlan was a headliner for a benefit concert in Vancouver along with other Canadian superstars such as Avril Lavigne and Bryan Adams. The show also featured a performance by the Sarah McLachlan Musical Outreach Choir & Percussion Ensemble, a children's choir and percussion band from the aforementioned Vancouver outreach program. The concert was titled One World: The Concert for Tsunami Relief, and raised approximately $3.6 million for several Canadian aid agencies working in south and southeast Asia. The show was the brainchild of McLachlan's manager, Terry McBride, CEO of Nettwerk. It ran for four hours and aired live on CTV across Canada.

On July 2, 2005, McLachlan participated in the Philadelphia installment of the Live 8 concerts, where she performed her hit "Angel" with Josh Groban. These concerts, which were held simultaneously in nine major cities around the world, were intended to coincide with the G8 summit to put pressure on the leaders of the world's richest nations to fight poverty in Africa by increasing aid.

On a number of occasions, McLachlan has also found herself in the news for other reasons:

In 1994, she was sued by Uwe Vandrei, an obsessed fan from Ottawa, Ontario, who alleged that his letters to her had been the basis of her hit single "Possession". This lawsuit never came to trial, however, as the plaintiff was found dead in an apparent suicide before the trial began. The lawsuit was also challenging for the Canadian legal system. This topic was explored in length in Canadian author Judith Fitzgerald's book, Building A Mystery: The Story of Sarah McLachlan & Lilith Fair. In 1998, the title of McLachlan's song "Do What You Have to Do" was cited in Kenneth Starr's report as the subject of a letter from Monica Lewinsky to Bill Clinton. In 1999, McLachlan and Nettwerk were sued by Darryl Neudorf, a Vancouver musician (and onetime member of 54-40) who alleged that he had made a significant and uncredited contribution to the song writing on Touch. The judge in this suit ultimately ruled in McLachlan's favour. In 2004, McLachlan's song "The Path of Thorns" was the 50 millionth song downloaded from Apple's iTunes Music Store. Sarah has also sold an estimated 30 million albums world wide. Her song "I Will Remember You" has been used all over the U.S. as a graduation song. According to a letter handwritten by McLachlan, copies of which were sent to members of her fanclub in late March, 2006, Sarah will begin work on a holiday album due to be released later that year.