Saeed Jaffrey was born on 8 January 1929 to a Punjabi Muslim family in Malerkotla, Punjab region. At that time, his maternal grandfather, Khan Bahadur Fazle Imam, was the Dewan or Prime Minister of the princely state of Malerkotla. His father, Dr Hamid Hussain Jaffrey, was a physician and a civil servant with the Health Services department of the United Provinces of British India. Jaffrey and his family moved from one medical posting to another within the United Provinces, living in cities like Muzaffarnagar, Lucknow, Mirzapur, Kanpur, Aligarh, Mussoorie, Gorakhpur and Jhansi.

In 1938, Jaffrey joined Minto Circle School at Aligarh Muslim University where he developed his talent for mimicry. In 1939 he played the role of Dara Shikoh in a school play about Aurangzeb, the last great Mughal Emperor. At Aligarh, Jaffrey also mastered the Urdu language and attended riding school. At the local cinemas in Aligarh, he saw many Bollywood movies and became a fan of Motilal, Prithviraj Kapoor, Noor Mohammed Charlie, Fearless Nadia, Kanan Bala and Durga Khote.

In 1941 at Mussoorie, Jaffrey attended Wynberg Allen School, a Church of England public school where he picked up British-accented English. He played the role of the Cockney cook, Mason, in the annual school play, R. C. Sherriff's Journey's End. After completing his Senior Cambridge there, Jaffrey attended St. George's College, Mussoorie, an all-boys' Roman Catholic school run by Brothers of Saint Patrick. He played the role of Kate Hardcastle in the annual school play, Oliver Goldsmith's She Stoops To Conquer. At Mussoorie, Saeed and his brother Waheed would often sneak out at night to watch British and American films at the local theatres.

In 1945, Jaffrey gained admission to Allahabad University where he completed his B.A. degree in 1948 and M.A. degree in 1950. At Allahabad, Saeed learned about Hindu religion and mythology for the first time. While visiting his father in Gorakhpur in the winter of 1945, Saeed discovered the BBC World Service on the shortwave radio. When India gained independence from Britain on 15 August 1947 Jaffrey heard Jawaharlal Nehru's inaugural speech on All India Radio as the Prime Minister of India, titled Tryst with Destiny. The partition of India caused all of Saeed's relatives in New Delhi and Bannoor, Punjab to flee to Pakistan.

Along with Frank Thakurdas and 'Benji' Benegal, Jaffrey set up the Unity Theatre, an English language repertory company at New Delhi in 1951. The first production was of Jean Cocteau's play The Eagle Has Two Heads, with Madhur Bahadur playing the role of the Queen's Reader opposite Saeed as Azrael. Unity Theatre subsequently staged J. B. Priestley's Dangerous Corner, Dylan Thomas' Under Milk Wood, Molière's The Bourgeois Gentleman, Christopher Fry's The Firstborn and T. S. Eliot's The Cocktail Party .

After graduation from Miranda House in 1953, Bahadur joined All India Radio. She worked as a disc jockey at night. Jaffrey and Bahadur, having fallen "madly in love", dated at Gaylord, a restaurant in Connaught Place. At Unity Theatre, Bahadur and Jaffrey acted together in Christopher Fry's A Phoenix Too Frequent, followed by Oscar Wilde's The Importance of Being Earnest, Tennessee Williams' Auto-da-Fé, and william Shakespeare's Othello.

In early 1955, Bahadur left to study drama formally at the Royal Academy of Dramatic Art (RADA), a drama school in the UK. In late 1955, Jaffrey won a Fulbright scholarship to study drama in America the following year. In spring 1956, he approached Bahadur's parents in Delhi for her hand in marriage but they refused because they felt that his financial prospects as an actor did not appear sound. In summer 1956, Jaffrey resigned from his position as Radio Director at All India Radio. He flew to London on his way to America and proposed to Bahadur. She refused but gave him a tour of RADA where she pointed out a young Peter O'Toole and other English stage actors who would later achieve prominence. A few days later, Jaffrey boarded the RMS Queen Elizabeth to sail across the Atlantic Ocean from Southampton to New York City.

In September 1957, Bahadur and Jaffrey returned to Washington, D.C. where Jaffrey rehearsed for the 1957 – 58 season with the National Players, a professional touring company that performed classical plays all over America. He was the first Indian to take Shakespearean plays on a tour of the United States. He was cast in the role of Friar Laurence in Romeo and Juliet. He played Gremio in The Taming of the Shrew. Midway through the tour, Jaffrey returned to Washington DC from Miami to marry Bahadur in a modest civil ceremony. The next day, they travelled to New York City where Bahadur was taken on as a tour guide at the United Nations while Jaffrey undertook public relations work for the Government of India Tourist Office. They lived on West 27th Street, between Sixth and Broadway. Between 1959 and 1962 Bahadur and Jaffrey had three daughters, Meera, Zia and Sakina.

Jaffrey had three daughters from his 1958-1964 marriage to Madhur Jaffrey: Zia, Meera and Sakina. Sakina Jaffrey is also an Actress and acted alongside her father in the Canadian film Masala (1991).

In 1961 Jaffrey was forced to give up his job as Publicity Officer with the Government of India Tourist Office. He went back to radio and joined The New York Times Company's radio station WQXR-FM where his first broadcast program was Reflections of India with Saeed Jaffrey. Saeed also took up acting on stage. The pay for such roles was generally $10/hour.

In 1963, Jaffrey toured with Lotte Lenya and the American National Theater and Academy to perform Brecht on Brecht, a revue which was seen in Boston, Chicago, Milwaukee and Detroit. In summer 1964, Jaffrey along with some actor friends, created a multi-racial touring company called Theater In The Street, giving free performances of Molière's The Doctor Despite Himself in Harlem, Brooklyn and Bedford–Stuyvesant.

By 1964, the Jaffreys' marriage had collapsed. Madhur arranged for their children to live with her parents and sister in Delhi while she went to Mexico for the formal divorce proceedings. The divorce was finalized in 1966.

In 1965 Jaffrey was offered the role of the Hindu God Brahma in Kindly Monkeys at the Arts Theatre, London. Favourable reviews of the play brought an offer from the BBC World Service to write, act and narrate scripts in Urdu and Hindi. Jaffrey played the small part of barrister Hamidullah in the BBC Television adaptation of A Passage to India. In order to pay the rent on his one bedroom flat in Chelsea, Jaffrey took a job as an assistant cashier at Liberty's, a department store selling luxury goods.

In early 1966, Jaffrey returned to New York City to play the haiku-karate expert Korean police chief Kim Bong Choy in Nathan Weinstein, Mystic, Connecticut that opened on Broadway at the Brooks Atkinson Theatre. In summer that year he played a role in The Coffee Lover, a comedy starring Alexis Smith that toured Massachusetts, Connecticut and Maine. Later that year, he recorded a narration of the Kama Sutra titled The Art of Love for Vanguard Records. It was listed by Time magazine in February 1967 as "one of the five best spoken word records ever made".

Back in London, Jaffrey was given the opportunity to shoot in India for the next Merchant Ivory film, The Guru (1969). He flew to Bombay in December 1967 and met his daughters after a gap of three years. He returned to London in the summer of 1968. He became the first Indian in a starring role in London's West End theatre when he played a Pakistani Photographer in On A Foggy Day.

His film credits include The Wilby Conspiracy (1975), The Man Who Would Be King (1975), Shatranj Ke Khiladi (The Chess Players) (1977), Sphinx (1981), Gandhi (1982), A Passage to India (1965 BBC version and 1984 film), The Far Pavilions (1984), The Razor's Edge (1984), and My Beautiful Laundrette (1985). He has also appeared in many Bollywood films in the 1980s and 1990s. For television he starred in Gangsters (1975–78), The Jewel in the Crown (1984), Tandoori Nights (1985–87) and Little Napoleons (1994). He also appeared as Ravi Desai on Coronation Street and in Minder as Mr Mukerjee in Series 1 episode The Bengal Tiger.

He broke into Bollywood with Satyajit Ray's Shatranj Ke Khilari (1977) for which he won the Filmfare Best Supporting Actor Award in 1978. His cameo role as the paanwala Lallan Miyan in Chashme Buddoor (1981) won him popularity with Indian audiences. He became a household name in India with his roles in Raj Kapoor's Ram Teri Ganga Maili (1985) and Henna (1991), both of which won him nominations for the Filmfare Best Supporting Actor Award.

In 1980 Jaffrey married Jennifer Sorrell, an agent and freelance casting Director. They remained married until his death in 2015.

He was the first Asian to receive British and Canadian film award nominations. In 1995 he was awarded an OBE in recognition of his services to drama, the first Asian to receive this honour. His memoirs, Saeed: An Actor's Journey, were published in 1998.

In 1998 Saeed wrote an autobiography, Saeed: An Actor's Journey in 1998.

Jaffrey died at a hospital in London on 15 November 2015, after collapsing from a brain haemorrhage at his home. He was posthumously conferred with Padma Shri award in January 2016.