Shekhar Kapur started his career working with a multinational oil company. He moved to the United Kingdom in 1970, and spent several years working as an accountant and management consultant.

Shekhar Kapur started his career as an actor in the movie Jaan Hazir Hai (1975) and later in Toote Khilone, in Bollywood. He appeared in several Hindi television dramas, such as Udaan (Doordarshan), opposite Kavita Chaudhary, Upanyaas (Doordarshan) opposite Nisha Singh, and Masoom opposite Neena Gupta.

He turned Director with the family drama Masoom (1983), starring Naseeruddin Shah, Shabana Azmi and a young Jugal Hansraj. The plot followed the story of an illegitimate boy who struggles to find acceptance from his stepmother. He then directed the 1987 science-fiction film Mr. India, starring Anil Kapoor, Sridevi and Amrish Puri in his most famous role as the villain Mogambo. Puri's most famous dialogue in this film "Mogambo Khush Hua" is still remembered. In 1994 he directed the critically acclaimed Bandit Queen and played a cameo in the film as a truck driver.

Kapur was infamous for abandoning several films he was originally the Director of. He was originally the Director of the 1989 film Joshilaay, which starred Sunny Deol, Anil Kapoor, Sridevi and Meenakshi Sheshadri before leaving the production halfway, and its Producer Sibti Hassan Rizvi stepped in to complete the film. In 1992, he had shot some scenes for Barsaat, which was originally titled Champion and was going to be the debut film of Bobby Deol, but he left the production and was replaced by Rajkumar Santoshi. In 1992, he was set to direct the science-fiction film titled Time Machine, which was to star Aamir Khan, Raveena Tandon, Naseeruddin Shah and Rekha, but he abandoned the project halfway through due to financial problems. The film was left incomplete, although there were talks many years later that Kapur would revive the project with a new cast, which never happened.. In 1995, he partly directed Dushmani, starring Sunny Deol, Jackie Shroff and Manisha Koirala before its Producer Bunty Soorma stepped in to complete the film.

He gained international recognition with the 1994 Bollywood film Bandit Queen, based on Mala Sen's biography of infamous Indian bandit and Politician Phoolan Devi, which won the National Film Award for Best Feature Film in Hindi and Filmfare Critics Awards for Best Movie and Best Direction for that year. It was premiered in the Directors Fortnight section of the 1994 Cannes Film Festival and was screened at the Edinburgh Film Festival.

Kapur then married Suchitra Krishnamoorthi, an Indian Actress, Writer, Painter and singer in 1997. They are divorced. They have a daughter named Kaveri Kapur.

Kapur was the executive Producer of the film The Guru. He established an Indian film company with Ram Gopal Verma and Mani Ratnam, though the group has thus far produced only one film, Dil Se.. (1998), starring Shahrukh Khan and Manisha Koirala. Kapur executive-produced the Bollywood-themed musical Bombay Dreams by Andrew Lloyd Webber, which has been running in London's the West End since 2002 and on Broadway in New York City since 2004.

In 2005, Kapur worked with Okan Quail on Hunji!, a story of a young Indian maid who idolised Sachin Tendulkar. Although it gained some acclaim as one of his finest films, critics across the UK and India called it a flop.

In 2006, Kapur formed Liquid Comics and Virgin Animation, an entertainment company focused on creating new stories and characters for a global audience. The Shakti titles of Kapur and Deepak Chopra's company debuted with Devi and The Sadhu. Devi is about "a fierce feminine warrior, stronger than the Gods themselves ... a champion of the heavens, and the protector of man", while The Sadhu is about one man's choice between his spiritual oath and his human instinct."

One of his shelved projects was a film tentatively titled The Nine o'Clock War, which he had planned with his longtime friend and previous collaborator, the Australian actor Heath Ledger in the role of a popular television news anchor. It never happened, as a result of the actor's unexpected death in 2008.

He is set to direct Paani. The film is reported to star Sushant Singh Rajput and will be produced by Aditya Chopra. Its music will be composed by A. R. Rahman. The announcement was made at the 63rd Cannes Film Festival in 2010.

In 2013, Shekhar Kapur hosted the TV show Pradhanmantri on ABP News. On the show, which aims to bring never-seen-before facets of Indian history, he was the narrator.

He was married to Medha Gujral, niece of former Indian Prime Minister I. K. Gujral. They split in 1994. Medha later married popular bhajan singer Anup Jalota (she was his third wife). She died on November 25, 2014 at a hospital in New York City of liver failure following a second heart and first kidney transplant.

In 2016, Shekhar Kapur delivers an autobiographical film and documentary about Amma, well known as Mata Amritanandamayi Devi, called "The Science of Compassion".