Shirley Marlin Noznisky was born in Wilmington, Delaware, on October 25, 1939, to Jewish parents Isaac and Bessie Noznisky; her father was born in Poland circa 1894 and became a US citizen in 1912. Isaac set up a scrap metal Business at South Claymont Street, Wilmington. He was shot dead by a drunken fellow East European immigrant on November 18, 1956. Shirley Noznisky had one brother, Julius, 16 years her senior.

In 1959, Shirley moved to New York City and quickly married magazine Photographer Hans Lownds; Shirley was his third wife. Lownds persuaded her to change her name to Sara because his first wife, also named Shirley, had left him and he did not want to be reminded of his previous marriage. Sara and Hans lived in a five-story house on 60th Street in Manhattan, between Second and Third Avenues. Sara had a modeling career and appeared in Harper's Bazaar as the 'lovely luscious Sara Lownds'—then became pregnant. Their daughter Maria was born October 21, 1961. Within a year of the birth, the marriage began to fail.

Lownds and Dylan became romantically involved sometime in 1964; soon afterwards, they moved into separate rooms in New York's Hotel Chelsea to be near one another. Dylan biographer Robert Shelton, who knew Bob and Sara in the mid-1960s, writes that Sara "had a Romany spirit, seeming to be wise beyond her years, knowledgeable about magic, folklore and traditional wisdom."

In addition to Blonde on Blonde, Blood on the Tracks, and Desire, some critics have suggested Sara Dylan is the inspiration for other works. Both Clinton Heylin and Andy Gill have connected Sara to "Love Minus Zero/No Limit" recorded in January 1965. Gill writes that this song expresses admiration for Sara's "Zen-like equanimity: unlike most of the women he met, she wasn't out to impress him or interrogate him about his lyrics." Heylin also credits Sara Dylan as the inspiration for "She Belongs to Me" (from 1965's Bringing It All Back Home) and "Abandoned Love" (recorded during the Desire sessions, but not released until the Biograph box set in 1985).

Sara Dylan is said to have inspired several songs by Dylan, and two have been directly linked to her. "Sad Eyed Lady of the Lowlands," the only song on the fourth side of the 1966 album Blonde on Blonde, was described by critic Robert Shelton as "virtually a wedding song for the former Sara Shirley N. Lownds."

In 1973, Bob and Sara Dylan sold their Woodstock home and purchased a modest property on the Point Dume peninsula, north of Malibu, California. They commenced constructing a large home on this site, and the subsequent re-modelling of the house occupied the next two years. Sounes writes that during this period, tensions began to appear in their marriage. The Dylans still retained a house in Manhattan. In April 1974, Dylan began to take art classes with Artist Norman Raeben in New York. Dylan would later say in an interview that the art lessons caused problems in his marriage: "I went home after that first day and my wife never did understand me ever since that day. That's when our marriage started breaking up. She never knew what I was talking about, what I was thinking about, and I couldn't possibly explain it."

The songs on Dylan's 1975 album Blood on the Tracks have been described by several of Dylan's biographers and critics as arising from the tension as his marriage to Sara collapsed. The album was recorded soon after the couple's initial separation. Dylan biographers Robert Shelton and Clinton Heylin have cautioned against interpreting the album as naked autobiography, arguing that Blood On The Tracks works on many levels—musical, spiritual, poetic—as well as a personal confession. Dylan himself denied at the time of the album's release that Blood on the Tracks was autobiographical, but Jakob Dylan has said, "When I'm listening to 'Subterranean Homesick Blues' I'm grooving along just like you. But when I'm listening to Blood On The Tracks, that's about my parents."

In "Sara" from the 1976 album Desire, Dylan calls her a "radiant jewel, mystical wife." Shelton writes that with this song, "Dylan seems to be making an unabashed confessional to his wife. A plea for forgiveness and understanding." Noting the autobiographical reference in the song to "drinkin' white rum in a Portugal bar" Shelton connects this line with a trip Dylan made to Portugal with Sara in 1965. In "Sara," Dylan seems to acknowledge his wife as the inspiration for "Sad Eyed Lady":

Heylin has quoted Steven Soles saying that, in 1977, Dylan came over unannounced to his apartment and played him ten or twelve songs that were "very dark, very intense" dealing with his bitterness over the divorce. Soles adds that none of these songs was ever recorded.

During the divorce proceedings, Sara was represented by attorney Marvin Mitchelson. Mitchelson later estimated that the settlement agreed was worth about $36 million to Sara and included "half the royalties from the songs written during their marriage." Michael Gray has written: "A condition of the settlement was that Sara would remain silent about her life with Dylan. She has done so." By some reports Dylan and Sara remained friends after the acrimony of the divorce subsided, and Clinton Heylin writes that the photo of Dylan on a hillside in Jerusalem, which appeared on the inner sleeve of the 1983 album Infidels, was taken by Sara.

Discussing his parents' marriage, Jakob Dylan said in 2005: "My father said it himself in an interview many years ago: 'Husband and wife failed, but mother and father didn't.' My ethics are high because my parents did a great job."