Zaentz was born on February 28, 1921, to immigrant Jewish parents in Passaic, New Jersey.

In 1955 he joined Fantasy Records, for many years the largest independent jazz record label in the world. In 1967 Zaentz and other partners purchased the label from founders Max and Sol Weiss. The partners signed roots-rock group Creedence Clearwater Revival (CCR), fronted by former Fantasy warehouseman John Fogerty.

In the early 1970s he saw the stage adaptation of One Flew Over the Cuckoo's Nest at a theatre in the Jackson Square area of San Francisco. Zaentz co-produced the film adaptation with actor Michael Douglas. The film won five Academy Awards including Best Picture, which Zaentz and Douglas shared. This award sweep had not been experienced in 41 years. In 1980, Zaentz created The Saul Zaentz Film Center in Berkeley, California, an editing and sound-mixing studio for his own films, independent filmmakers, and Hollywood productions.

In 1976, Zaentz acquired certain rights in J. R. R. Tolkien's books of The Hobbit and The Lord of the Rings. In 1978, he produced an animated version of The Lord of the Rings, written chiefly by Peter S. Beagle and directed by Animator Ralph Bakshi. Through Middle-earth Enterprises, Saul Zaentz owns the worldwide film, stage, and merchandise rights to The Lord of the Rings and The Hobbit. Saul Zaentz's Tolkien Enterprises signed an exclusive, worldwide license with Iron Crown Enterprises in 1982, which was at the time the biggest license in the history of the role-playing game industry.

Fantasy Records owns the distribution and publishing rights to the music of CCR; to extricate himself from his original contract with Fantasy, John Fogerty signed away even more than the original contract had stipulated. Additionally, bad Investments by Zaentz and Fantasy, seemingly on the group's behalf, cost CCR millions of dollars, some of which the group recouped through legal proceedings. In the 1980s, Zaentz sued Fogerty claiming plagiarism from Fogerty's own music asking for $140 million in damages but lost (Fantasy, Inc. v. Fogerty);

In 1984 Zaentz and Forman collaborated again, on the adaptation of the Peter Shaffer's stage play Amadeus about Composer Wolfgang Amadeus Mozart. It won eight Academy Awards, including Zaentz's second Best Picture, and spun off a best-selling Soundtrack album (distributed by Fantasy Records).

Zaentz next produced The Mosquito Coast, directed by Peter Weir on location in Belize, Central America, starring Harrison Ford, from the book by Paul Theroux. In 1988, Zaentz produced The Unbearable Lightness of Being, based on the Milan Kundera novel. The adaptation was directed by San Francisco's Philip Kaufman from a screenplay by Jean-Claude Carrière.

In 1992 Zaentz purchased the rights to the unpublished novel The English Patient and worked up a scenario with author Michael Ondaatje. In developing the project Zaentz resisted attempts by his backers to make the story more acceptable to a mainstream audience whereby they wanted him to cast Demi Moore a leading role. Zaentz instead chose Kristin Scott Thomas for the role. The book was adapted for the screen and directed by Anthony Minghella. English Patient swept the 69th Academy Awards, winning Best Director for Minghella and Best Picture for Zaentz. At the same ceremony, Zaentz also accepted The Irving G. Thalberg Memorial Award for lifetime achievement.

Fogerty counter-sued for reimbursement of attorneys' fees and in a decision by the U.S. Supreme Court, Fogerty v. Fantasy, 510 U.S. 517 (1994), he won. Fogerty composed songs about the experience on his 1985 album Centerfield ("Zanz Kant Danz", "Mr. Greed"), which were thinly veiled slams at Zaentz.

In 2003, Zaentz was made a Fellow of BAFTA, in recognition of his film career. In 2004–05. Zaentz and partners sold Fantasy Records to independent jazz label Concord Records, and closed the Saul Zaentz Film Center. In 2005–06 Zaentz embarked on a new film project, Goya's Ghosts, centered on events in the life of Spanish Painter Francisco Goya, starring Natalie Portman, Javier Bardem, Stellan Skarsgård as Goya, and featuring Randy Quaid as the king of Spain. The film was made with long-time collaborators Miloš Forman (director) and Jean-Claude Carrière (screenplay). Shot on location in Spain and edited in New York, the film was released in late 2006.

The Saul Zaentz Film Center (becoming the Zaentz Media Center after renovations) was a facility in Berkeley, California, which for many years provided production and post-production services for Bay Area filmmakers. Along with American Zoetrope and Lucasfilm, it was one of only three major film production facilities in Northern California. By 2005, it has largely shut down its post-production facilities, except for the foley recording studio, which is part of the still-active Fantasy Studios.

The film center was sold in 2007. It continues to house The Saul Zaentz Company, Concord Music Group and Fantasy Studios as well the Berkeley Digital Film Institute and other media production companies.

In 2010, it became clear that Peter Jackson would direct the Hobbit films after all.

In 2011, Zaentz's company began several legal actions against small businesses in the UK to enforce their "Hobbit" trademark, including the Hungry Hobbit cafe in Sarehole, near Birmingham and a pub in Southampton, England, which had traded as The Hobbit for twenty years. This raised the ire of many British correspondents such as Stephen Fry, who described it as "pointless, self-defeating bullying."

Zaentz died on January 3, 2014 in San Francisco, California at the age of 92 due to Alzheimer's disease complications.

The Saul Zaentz Charitable Foundation launched in 1997. On May 17, 2016, the Harvard Graduate School of Education (HGSE) announced a US35.5 million gift from the Saul Zaentz Charitable Foundation, describing it as "the largest gift ever given to a university to focus on advancing early childhood education, and the largest gift in HGSE's history".