Sheldon was born Sidney Schechtel in Chicago, Illinois to a German Jewish father and a Russian Jewish mother. His career began in 1937 in Hollywood, California, where he reviewed scripts and collaborated on a number of B-movies. After a stint in the military during World War II, Sheldon returned to civilian life and began writing musicals for the Broadway stage while continuing to write screenplays for both MGM Studios and Paramount Pictures.

Over the years, Sheldon has written for television, film, and stage, winning an Academy Award for Writing Original Screenplay (1947) for The Bachelor and the Bobby-Soxer, a Tony Award (1959) for his musical Redhead, and earned Emmy nominations for his work on I Dream of Jeannie, an NBC sitcom.

In 1969, Sheldon wrote his first novel, The Naked Face which earned him the Best First Novel Edgar Allan Poe Award from the Mystery Writers of America. His next novel, The Other Side of Midnight, went to #1 on the New York Times bestseller list as did several ensuing novels, a number of which were also made into motion pictures or TV miniseries. He has struggled with bipolar disorder for years; he nearly committed suicide at 17.