Bernhard was born in Flint, Michigan, the daughter of Jeanette (née LaZebnik) and proctologist Jerome Bernhard. Her parents raised her as a Conservative Jew. She has three brothers: Dan, David and Mark. Bernhard's family moved to Arizona when she was 10. Bernhard attended Saguaro High School in Scottsdale, graduating in 1973.

Bernhard became a staple at The Comedy Store. As her popularity as a Comedian grew she was cast as a supporting player on The Richard Pryor Show in 1977. Guest appearances on evening talk shows followed. Her big break came in 1983 when she was cast by Martin Scorsese to star as stalker and kidnapper Masha in the film The King of Comedy for which she won the National Society of Film Critics Award for Best Supporting Actress.

She began performing her first one-woman show called I'm Your Woman in 1985, and an album version was released. Bernhard appeared in a variety of tiny film and television roles throughout the 1980s while crafting her stand-up routine into a more performance art oriented show. She launched an Off-Broadway one woman show called Without You I'm Nothing, with You I'm Not Much Better in 1988 which played at the Orpheum Theatre. In 1990 it was turned into a film and a double album of the same title. The film was mostly shot on location in 1989 in the coconut grove at the Ambassador Hotel. A frequent guest on David Letterman's NBC program, it was during the run of 'Without You I'm Nothing, With You I'm Not Much Better' that she appeared with her then-good friend (and rumored lover) Madonna on the show. The two alluded to their romantic relationship and staged a sexy confrontation. They would continue to be friends for several years, with Bernhard even making an appearance in Madonna's movie Truth or Dare.

In 1991, Bernhard began playing the role of Nancy Bartlett on the hit sitcom Roseanne. She appeared in 33 episodes between 1991 and 1997, and was one of the first actresses to portray an openly lesbian recurring character on American television. The role is one of her best known, something she has lamented in her stand-up as being both a blessing and a curse. In September 1992, Bernhard did a nude pictorial for Playboy. She hosted the USA Network's Reel Wild Cinema for two seasons beginning in 1995. Bernhard continued acting in mostly independent films and TV guest roles and forays into mainstream films such as Hudson Hawk and Dallas Doll. In 1991 she released her first studio album, entitled Excuses for Bad Behavior (Part One). In 1995, she briefly appeared as a guest in the animated talk show Space Ghost Coast to Coast, in an episode titled "Jerk". In 1996, she guest-starred on an episode of Highlander: The Series called "Dramatic License" in which she played a romance Novelist writing about the life of the main character. She also appeared (as herself) on Will & Grace in an episode dealing with Will and Grace's spuriously bidding on Bernhard's Manhattan apartment in order to become friendly with her and culminates in a diatribe from Bernhard when their ruse is exposed, with obfuscating sounds of a blender (she was having a smoothie made) blotting out supposed obscenities. She returned as herself briefly, two years later.

Bernhard is openly bisexual and a strong supporter of gay rights. On July 4, 1998, Bernhard gave birth to a daughter, Cicely Yasin Bernhard, whom she raises with her longtime partner, Sara Switzer.

Bernhard was a featured guest singer with children's Artist Dan Zanes on the Family Dance album's "Thrift Shop". In an interview with Howard Stern, the Comedian revealed that she was originally offered the role of Miranda Hobbes of TV show Sex and the City, but opted out due to the "terrible" original script and low paycheck. In 2013, the media announced that Sandra Bernhard would be joining the cast of ABC Family's Switched at Birth along with Glee's Max Adler. Sandra would assume the role of an art professor on the Season 3 Opener in January 2014. Starting in 2015, Bernhard began hosting a radio show, Sandyland, on Sirius XM's, Radio Andy.