Steele was born on October 19, 1958, at Andrews Air Force Base in Prince George's County, Maryland, and was adopted as an infant by william and Maebell Steele. His father died in 1962. His mother, who had been born into a sharecropping family in South Carolina, worked for minimum wage as a laundress to raise her children. After Steele's father died, she ignored her friends' appeals to apply for public assistance, later telling Steele, "I didn't want the government raising my children". She later married John Turner, a truck driver. Michael and his sister, Monica Turner, were raised in the Petworth neighborhood of North West, Washington, D.C., which Steele has described as a small, stable and racially integrated community that insulated him from some of the problems elsewhere in the city. Steele's sister later married and divorced former heavyweight boxing champion Mike Tyson.

In 1981, Steele received a bachelor's degree in international studies from the Johns Hopkins University in Baltimore City, Maryland.

In the 1990s, Steele worked as a partner at the international law firm of LeBoeuf, Lamb, Greene & MacRae and co-founded the Republican Leadership Council, a "fiscally conservative and socially inclusive" political action committee. Steele also made numerous appearances as a political pundit on Fox News and other media outlets prior to running for public office. He made an unsuccessful run in the 2006 U.S. Senate election in Maryland, losing to Democrat Ben Cardin. From 2007 to 2009, Steele was chairman of GOPAC, a 527 organization that trains and supports Republican candidates in state and local elections. After serving one term as RNC Chairperson from 2009 to 2011, he lost his bid for a second term and was succeeded by Reince Priebus. Since 2011, Steele has contributed as a regular columnist for online magazine The Root and as a political analyst for MSNBC.

From 1991 to 1997, Steele worked in Washington, D.C. as a corporate securities associate for the Cleary, Gottlieb, Steen & Hamilton international law firm, where he specialized in financial Investments for Wall Street underwriters. He left the firm to found the Steele Group, a Business and legal consulting firm.

After joining the Republican Party, he became chairman of the Prince George's County Republican Central Committee. He was a founding member of the centrist, fiscally conservative and socially inclusive Republican Leadership Council in 1993 but left in 2008 citing disagreements over endorsing primary candidates. In 1995, the Maryland Republican Party selected him as their Republican Man of the Year. He worked on several political campaigns, was an Alternate Delegate to the 1996 Republican National Convention and a Delegate to the 2000 Republican National Convention. Steele's Maryland biography identifies him as a member of the Tau Epsilon Phi fraternity.

In December 2000, he was elected chairman of the Maryland Republican Party, becoming the first African-American ever to be elected chairman of any state Republican Party.

In the September primary election, Ehrlich and Steele had no serious opposition. In the November 2002 general election, the Republican Ehrlich-Steele ticket won, 51 percent to 48 percent even though Maryland traditionally votes Democratic and had not elected a Republican Governor in almost 40 years. The Townsend-Larson campaign had been tainted by outgoing Democratic governor Parris Glendening's marital problems and backlash due to his strict enforcement of environmental regulations.

At the 2004 Republican National Convention, Steele gave the Republican counterpoint to Barack Obama's 2004 Democratic National Convention keynote address; it was Steele's first major national exposure. In April 2005, President Bush chose him to be a member of the U.S. delegation at the investiture of Pope Benedict XVI in Vatican City.

When Paul Sarbanes, Maryland's longest-serving United States Senator, announced in March 2005 that he would not be a candidate for re-election in 2006, top state and national Republican officials began pressing Steele to become their party's nominee for the seat. In April 2005, The Baltimore Sun announced the results of a poll it conducted, stating that Steele would run statistically neck and neck against either former NAACP head Kweisi Mfume, or Rep. Benjamin L. Cardin of Baltimore County. Steele formally announced his candidacy for the U.S. Senate on October 25, 2005.

Steele was a supporter of the Iraq War and President George W. Bush's war strategy. During his 2006 campaign, Steele opposed setting a timetable for U.S. withdrawal from Iraq. Steele has criticized President Obama on the issue, complaining that he has "demonized" the Iraq War.

Steele appeared several times on HBO's political show Real Time with Bill Maher, and was on Comedy Central's talk show The Colbert Report on January 23, 2007. He also hosted a PBS Republican Primary debate in Baltimore, Maryland on September 27, 2007.

Steele's comments drew criticism, with neoconservative william Kristol called for Steele's resignation and former George W. Bush adviser Karl Rove calling Steele's comment as "boneheaded." U.S. Senator John McCain of Arizona, the Republican nominee for President in the 2008 election, withdrew his support from Steele, calling Steele's comments "wildly inaccurate... there is no excuse for them" and saying "I think that Mr. Steele is going to have to assess as to whether he can still lead the Republican Party as chairman of the Republican National Committee." Senator Jim DeMint called upon Steele to apologize Senator Lindsey Graham who said "It was an uninformed, unnecessary, unwise, untimely comment. This is not President Obama's war, this is America's war. We need to stand behind the President." Former Vice President Dick Cheney's daughter Elizabeth Cheney has also called for Steele to resign. However, Congressman Ron Paul, who is known for his generally antiwar stance, in support of Steele said "Michael Steele has it right, and Republicans should stick by him."

In 2009, speaking on illegal immigration, Steel called for the U.S. to "secure our borders first," saying "You cannot begin to address the concerns of the people who are already here unless and until you have made certain that no more are coming in behind them."

In July 2010, video footage of Steele was released in which he stated that the Afghan war was "a war of Obama's choosing. If he's such a student of history has he not understood that, you know, that's the one thing you don't do - is engage in a land war in Afghanistan? Everyone who has tried, over a thousand years of history has failed." He also said the war was "not something the United States had actively prosecuted or wanted to engage in." In fact, War in Afghanistan was initiated by George W. Bush in October 2001 in retaliation for the September 11 attacks on New York City and Washington D.C.; Barack Obama has increased troop levels there since taking office.

After his loss in the chairmanship election, Steele was hired by MSNBC to be a regular political analyst as of May 2011. He also was hired to be a columnist for the online magazine The Root, an African-American news and commentary site owned by The Washington Post Company.

On C-SPAN's Washington Journal on the Sunday after the 2012 Obama reelection victory, Steele expressed some interest in running for RNC Chairman again. Steele emphasized the need to make conservative minorities feel comfortable and welcome in a party that offered them opportunities to launch political careers in counties and statehouses.

Steele also currently co-hosts Steele & Ungar, a Monday–Friday radio show on Sirius-XM's politically moderate POTUS station with liberal Rick Ungar, discussing liberal and conservative viewpoints about current events with guests and callers.

Steele was openly critical of Donald Trump during his 2016 presidential campaign and has continued to oppose President Trump during his subsequent administration.

In a January 2018 interview on MSNBC, in response to an accusation that President Trump had referred to El Salvador and Haiti as "shithole countries," Steele expressed his belief that the President was "racist."