Steele was born in Bermondsey, London. Father was Thomas Walter Hicks, and mother was Elizabeth Ellen Bennett. They married in 1933, in Bermondsey. He and [Winifred] Ann Donoughue married at St. Patrick's Church, Soho Square, London, in spring 1960. They have one daughter, Emma Elizabeth (1969).

The increase in home-grown musical talent during the 1950s and 60s allowed Steele to progress to a career in stage and film musicals, leaving behind his pop idol identity. In 1957 he was voted the seventh most popular actor at the British box office.

Only four months after his first chart presence, he was filming his life story. To do so, Steele and his songwriting collaborators, Lionel Bart and Mike Pratt, wrote twelve songs in seven days. His first three single releases were issued at a rate of one every three weeks. In 1957 Steele bought a four-bedroomed house in South London for his parents. In August 1959, Steele undertook a three-day concert visit to Moscow.

Lamar Fike, a former member of the Memphis Mafia, who lived with Presley at the time, has posted a claim that it was he, not Presley, who visited London and Steele for a day in 1958.

In 1960, a tour of Australia had not been particularly successful and on his return to England he received two offers, one to star in the play Billy Liar, the other to join the Old Vic Company. He chose the latter.

In the West End he appeared in She Stoops to Conquer, and played the title role of Hans Christian Andersen. On film, he recreated his London and Broadway stage role in Half a Sixpence, and played character roles in The Happiest Millionaire and Finian's Rainbow, although many critics found his personality to be somewhat overwhelming on screen. In this latter film, probably his best known appearance in the films, he played Og, the leprechaun turning human, and co-starred with Petula Clark and Fred Astaire. In 1968 British exhibitors voted him the fourth most popular star at the local box office.

In April 1971, Steele starred in his own show Meet Me in London at London's Adelphi Theatre.

In 1978, Steele performed in a TV movie version of Gilbert and Sullivan's The Yeomen of the Guard (misspelled as "The Yeoman..."), singing the role of the hapless jester Jack Point.

He also wrote a children's novel, entitled Quincy, about a reject toy trying to save himself and his fellow rejects in the basement of a toy store from the furnace the day after Christmas. This was turned into the television film, Quincy's Quest, in 1979, in which Steele played Quincy and Mel Martin played Quincy's girlfriend doll, Rebecca.

In the early 1980s, Steele wrote and published a novel titled The Final Run about World War II and the evacuation of Dunkirk.

In 1983, Steele directed and starred in the West End stage production of Singin' in the Rain at the London Palladium. In 1991 he toured with Some Like It Hot the stage version of the Jack Lemmon/Tony Curtis/Marilyn Monroe film. In 2003, after a decade-long hiatus, save his one-man shows An Evening With Tommy Steele and What A Show!, he toured as Ebenezer Scrooge in a production of Scrooge: The Musical, an adaptation of Scrooge. Following this return, he reprised his role at the Palace Theatre, Manchester over Christmas 2004, and brought the production to the London Palladium for Christmas 2005. In 2008, at the age of 71, Steele toured in the lead role of the stage musical Doctor Dolittle, and has reprised his role as Scrooge every Christmas season since 2009.

Steele is a respected Sculptor and three of his major works have been on public display: Bermondsey Boy at the Rotherhithe Town Hall in London (stolen in 1998, current whereabouts unknown), and Eleanor Rigby which he sculpted and donated to the City of Liverpool as a tribute to the Beatles. The statue stands in Stanley Street, Liverpool, not far from the Cavern Club. Steele has another sculpture featuring two rugby players on display at Twickenham Stadium. He is also an Artist of some note and has exhibited at the Royal Academy. When he lived in Petersham, Surrey, (opposite The Dysart Arms), outside his front door stood a life-style sculpture of Charlie Chaplin as "The Tramp".

According to Kenwright: "Elvis flew in for a day and Tommy showed him round London. He showed him the Houses of Parliament and spent the day with him". Kenwright admitted in 2008 that he was not sure whether he should have told the story. Steele said: "It was two young men sharing the same love of their music. I swore never to divulge publicly what took place and I regret that it has found some way of getting into the light. I only hope he can forgive me."

In late 2009 his greatest hits collection, The Very Best of Tommy Steele, reached the Top 40 in the UK Albums Chart. This was the first UK chart entry, of any kind, that Steele had enjoyed for over 46 years.

In 2012, Steele was among the British cultural icons selected by Artist Sir Peter Blake to appear in a new version of his most famous artwork – the Beatles' Sgt. Pepper's Lonely Hearts Club Band album cover – to celebrate the British cultural figures of the last six decades.