Guttenberg was born in Brooklyn, New York, the son of Ann Iris (née Newman), a surgical assistant, and Jerome Stanley Guttenberg, an electrical Engineer. He has two sisters. He had a Jewish upbringing in North Massapequa, New York, where he graduated from Plainedge High School in 1976 (according to some sources, he transferred to New York City's High School of Performing Arts two years before graduating). During high school, he attended a summer program at the Juilliard School where he studied under John Houseman, and he won a role in an off-Broadway production of The Lion in Winter. After his high school graduation, he attended the State University of New York (SUNY) at Albany for a year. He moved to California to pursue an acting career. Guttenberg left for Los Angeles with $300 in his pocket, salami from his mother, and his father's briefcase. As Guttenberg recounts, within weeks he was cast in a Kentucky Fried Chicken commercial playing opposite Colonel Sanders.

Guttenberg's first credit was in a TV movie Something for Joey (1977). He had an uncredited bit part in Rollercoaster then played the starring role in the 1977 California high school comedy The Chicken Chronicles. The picture, set in Beverly Hills in the Spring of 1969, was not a big box-office success, but did become a cult classic after extensive showings on premium cable networks in the United States. He also appeared in the 1978 film The Boys From Brazil, based on the Ira Levin best seller, and guest starred on the show Family. Guttenberg starred in the short lived TV series Billy (1979), based on Billy Liar. He had a support role in the tennis romance film Players (1979). In 1980, a Coca-Cola commercial featured him trying to help a non-English-speaking woman whose car stalled. They share a Common bond in their love of Coke.

Guttenberg starred in the TV movie To Race the Wind (1980) playing blind Lawyer Harold Krents. The same year he starred in the Nancy Walker-directed-Allan Carr produced movie Can't Stop the Music—a semi-autobiographical movie about the disco group Village People. Guttenberg played Jim Craig in another true life-inspired TV movie Miracle on Ice (1981). He had a key role in Barry Levinson's Diner (1982) then starred in another short-lived TV series No Soap, Radio (1982). Guttenberg starred in the action comedy The Man Who Wasn't There (1983) and had a support part in the television movie The Day After (1983). He starred in The Ferret (1984) a pilot for a TV series that was not picked up.

Guttenberg starred in an enormous hit when he played the lead role in Police Academy (1984). It was quickly followed by Police Academy 2: Their First Assignment (1985). Guttenberg then had the romantic male lead in Cocoon (1985), another box office success. A comedy he starred in, Bad Medicine (1985), was not particularly successful. Guttenberg played Pecos Bill in an episode of Tall Tales & Legends then was in Police Academy 3: Back in Training (1986). Guttenberg starred in Short Circuit (1986) opposite Ally Sheedy, another very popular film. He changed pace with the thriller The Bedroom Window (1987), directed by Curtis Hanson, then made Police Academy 4: Citizens on Patrol (1987), his last Police Academy Film.

Guttenberg had the biggest financial success of his career to date with Three Men and a Baby (1987) with Tom Selleck and Ted Danson. He supported Peter O'Toole and Daryl Hannah in High Spirits (1988), which flopped. Cocoon: The Return (1989) was a commercial disappointment as was Don't Tell Her It's Me (1990). 3 Men and a Little Lady (1990) however was a hit. In 1989 he appeared in the Michael Jackson music video "Liberian Girl".

Guttenberg married model Denise Bixler on September 30, 1988. They separated in June 1991 and were divorced in 1992. He has lived with WCBS-TV reporter Emily Smith since 2014; the couple announced their engagement in December 2016.

In 1990 he replaced Timothy Hutton in the lead role of Prelude to a Kiss at the Helen Hayes Theatre on Broadway. He also performed in London's West End, where he starred in The Boys Next Door. He appeared in the world stage premiere production of Furthest From the Sun, which Woody Harrelson directed and co-authored.

He directed "Love Off Limits" for CBS Schoolbreak Special in 1993 and starred in The Big Green (1995) in England. He was among the ensemble in Home for the Holidays (1995) and starred in It Takes Two (1995) with Kirstie Alley and Mary-Kate and Ashley Olsen. He also starred in Zeus and Roxanne (1997), Casper: A Spirited Beginning (1997) an alongside Kirsten Dunst in Disney's Tower of Terror (1997), based on the attraction at the Disney's Hollywood Studios at the Walt Disney World Resort in Lake Buena Vista, Florida. In the late 90s he made some action films, Airborne (1998) and Overdrive (1998) and the comedy Home Team (1998).

His first film as director/producer/co-screenwriter/star was P.S. Your Cat Is Dead (2002), a film adaptation of a novel and Broadway play by James Kirkwood, Jr.. He starred in Mojave Phone Booth (2006) as Barry, and Making Change as Trafton. In Single Santa Seeks Mrs. Claus and its sequel Meet the Santas, he played the starring role of Nick. He had a recurring role on the 2005-2006 season of the television series Veronica Mars as Woody Goodman, a wealthy businessman and community leader. He appeared as a lead in the NBC made-for-TV remake of The Poseidon Adventure, which aired on November 20, 2005, playing Richard Clarke, a failing Writer having an affair with a massage therapist. He also appeared in According to Jim episode "Two for the Money" in 2008

The sixth-annual Fire Island Golden Wagon Film Festival honored Guttenberg with the 2008 Tony Randall Lifetime Achievement Award for his work in the entertainment industry, as well as his community Service efforts. The award was created in tribute to the first Golden Wagon honoree, Tony Randall, and is given to a member of the entertainment industry who embodies the same love of Fire Island, independent spirit, and community Service that Randall shared.

In an interview published August 1, 2010, Guttenberg revealed that David Diamond and David Weissman were writing a script for Police Academy 8. Eight days later, actor Bobcat Goldthwait released a statement urging Hollywood to reboot the Police Academy series with a new group of actors instead of the original cast members. Goldthwait confirmed that Steve Guttenberg would return and that movie bosses were trying to get Kim Cattrall and Sharon Stone to return for an eighth sequel though Goldthwait said he had no Desire to return to the series.

On December 12, 2011, Guttenberg received a star on the Hollywood Walk of Fame. The star is located at 6411 Hollywood Blvd. On October 19, 2014, Guttenberg received a key to the city from Miami Beach Mayor Philip Levine for his work with Fun Paw Care, raising awareness for animal rights.

At the 2016 New York Walk to Fight Lymphedema & Lymphatic Diseases in Brooklyn, Guttenberg announced to attendees, via a pre-recorded message, that he had joined the Lymphatic Education & Research Network's (LE&RN's) Honorary Board. Since then, Guttenberg has been active in raising awareness for lymphedema (LE) and lymphatic diseases (LD), which affect an estimated 10 million people in the United States and over 100 million people worldwide.