Sibley was born in Sutton, Massachusetts and after completing preparatory studies, he graduated from Rhode Island College (now Brown University) at Providence in 1794. He studied law, was admitted to the Bar in 1795 and began a practice in Marietta, Ohio. He soon moved to Cincinnati and then moved again to Detroit, Michigan in 1797, shortly after the British handed over the fort in 1796. When he arrived, Sibley was one of only two lawyers in Detroit. Being a pioneer lawyer was a physically challenging profession, often requiring long travel by horseback through wilderness over Indian trails in all types of weather to attend the territorial courts in Cincinnati, Marietta, or Chillicothe, Ohio.

In December, 1798, in the first election in Michigan under United States control was held in a Detroit tavern. Although Sibley was elected, his opponent, James May, claimed he had won by providing liquor for the voters. Despite the protestation, Sibley represented Wayne County in the first legislature of the Northwest Territory, commencing his term in January 1779.

Sibley was instrumental in passing the legislation in 1802 by which Detroit was incorporated as a town. Sibley was elected first as Chairman of the Board of Trustees, and then under the first city charter of 1806 as the first mayor of Detroit. During the War of 1812, Sibley commanded a company of riflemen in defense of Detroit, though the British attack was successful and William Hull surrendered the fort. After the war, Sibley served as Auditor of Public Accounts for the Michigan Territory from 1814-1817.

Sibley was appointed as the first United States Attorney for the Michigan Territory by U.S. President James Madison, serving from 1815 to 1823. When William Woodbridge resigned on August 9, 1820 as territorial Delegate to the Sixteenth United States Congress, Sibley was elected to fill the vacancy. Sibley won re-election to the Seventeenth United States Congress, serving in total from November 20, 1820 to March 3, 1823. Sibley continued to serve as U.S. Attorney, and thus held concurrent legislative and executive positions. During this period, Sibley was also commissioned, along with Lewis Cass, to negotiate the August 29, 1821, Treaty of Chicago with the Ottawa, Potawatomi, and Chippewa, in which the tribes ceded most of their territory south of the Grand River.

Sibley was not a candidate for re-election to Congress in 1822. In 1824, he was appointed as one of three justices on the Michigan Territorial Supreme Court by U.S. President James Monroe, becoming the sixth Territorial Justice. From 1827 until 1837, when he had to resign due to deafness, Sibley was Chief Justice of the court.

Sibley married Sarah Whipple Sproat Sibley (1782-1851), the only daughter of Colonel Ebenezer Sproat, a veteran of the American Revolutionary War. They had nine children, one of whom, Henry Hastings Sibley, was a territorial delegate from Wisconsin Territory, 1848-1849 and from Minnesota Territory, 1849-1853 and Governor of the State of Minnesota, 1858-1860. Another child, Catherine Whipple Sibley, married Charles Christopher Trowbridge, mayor of Detroit in 1834 and unsuccessful candidate for governor of Michigan in 1837.

Sibley died in Detroit and is interred in Elmwood Cemetery there. Upon his death, many members of the Bar wore a badge of mourning for 30 days.