Almost everything known about Sai Baba's early life stems from the hagiography that grew around him, narratives that hold special meaning to his devotees and are considered by them to be evidence of his divine nature. According to these sources, Sathya Narayana Raju was born to Meesaraganda Eashwaramma and Peddavenkama Raju Ratnakaram in the village of Puttaparthi, to a Raju family, in what was the Madras Presidency of British India. His birth, which his mother Eashwaramma asserted was by miraculous conception, was also said to be heralded by miracles.

Sai Baba's siblings included elder brother Ratnakaram Seshama Raju (1911–1985), sisters Venkamma (1918–1993) and Parvathamma (1920–1998), and younger brother Janakiramaiah (1931–2003).

As a child, he was described as "unusually intelligent" and charitable, though not necessarily academically inclined, as his interests were of a more spiritual nature. He was uncommonly talented in devotional music, dance and drama. From a young age, he was alleged to have been capable of materialising objects such as food and sweets out of thin air.

On 8 March 1940, while living with his elder brother Seshama Raju in Uravakonda, a small town near Puttaparthi, 14 year old Sathya was apparently stung by a scorpion. He lost consciousness for several hours and in the next few days underwent a noticeable change in behaviour. There were "symptoms of laughing and weeping, eloquence and silence." It is claimed that then "he began to sing Sanskrit verses, a language of which it is alleged he had no prior knowledge." Doctors concluded his behaviour to be hysteria. Concerned, his parents brought Sathya back home to Puttaparthi and took him to many priests, doctors and exorcists. One of the exorcists at Kadiri, a town near Puttaparthi, went to the extent of torturing him with the aim of curing him; Sathya seemingly kept calm throughout, which further worried his parents.

On 23 May 1940, Sathya called household members and reportedly materialised prasad and flowers for his family members. His father became furious at seeing this, thinking his son was bewitched. He took a stick and threatened to beat him if Sathya did not reveal who he really was. On 20 October 1940, the young Sathya responded calmly and firmly "I am Sai Baba", a reference to Sai Baba of Shirdi. This was the first time he proclaimed himself to be the reincarnation of Sai Baba of Shirdi—a saint who became famous in the late 19th and early 20th centuries in Maharashtra and had died eight years before Sathya was born.

In 1944, a mandir for Sai Baba's devotees was built near the village of Puttaparthi. It is now referred to as the "old mandir". The construction of Prashanthi Nilayam, the current ashram, began in 1948 and was completed in 1950. In 1954, Sai Baba established a small free general hospital in the village of Puttaparthi. He won fame for mystical powers and the ability to heal. In 1957 Sai Baba went on a North Indian temple tour.

In 1963, it was asserted that Sai Baba suffered a stroke and four severe heart attacks, which left him paralysed on one side. These events culminated in an event where he apparently healed himself in front of the thousands of people gathered in Prashanthi Nilayam who were then praying for his recovery.

On recovering, Sai Baba announced that he would one day next be reborn as an incarnation named Prema Sai Baba in the neighbouring state of Karnataka. He stated, "I am Shiva-Sakthi, born in the gotra (lineage) of Bharadwaja, according to a boon won by that sage from Siva and Sakthi. Siva was born in the gotra of that sage as Sai Baba of Shirdi; Shiva and Sakthi have incarnated as Myself in his gotra now; Sakthi alone will incarnate as the third Sai (Prema Sai Baba) in the same gotra in Mandya district of Karnataka State." He stated he would be born again eight years after his death at the age of 96, but died at the age of 84.

On 29 June 1968, Sai Baba made his only overseas trip, to Kenya and Uganda. In Nairobi, he spoke of his personal mission:

"I have come to light the lamp of Love in your hearts, to see that it shines day by day with added lustre. I have not come on behalf of any exclusive religion. I have not come on a mission of publicity for a sect or creed or cause, nor have I come to collect followers for a doctrine. I have no plan to attract disciples or devotees into my fold or any fold. I have come to tell you of this unitary faith, this spiritual principle, this path of Love, this virtue of Love, this duty of Love, this obligation of Love."

In 1968, he established Dharmakshetra or the Sathyam Mandir in Mumbai. In 1973, he established the Shivam Mandir in Hyderabad. On 19 January 1981, in Chennai, he inaugurated the Sundaram Mandir.

In a 1993 incident, four intruders armed with knives entered his bedroom, either as an assassination attempt or as part of a power struggle between his followers. Sai Baba was unharmed. During the scuffle and the police response, the intruders and two of Sai Baba's attendants were killed. The official investigation left questions unanswered.

In March 1995, Sai Baba started a project to provide drinking water to 1.2 million people in the drought-prone Rayalaseema region in the Anantapur district of Andhra Pradesh. In April 1999 he inaugurated the Ananda Nilayam Mandir in Madurai, Tamil Nadu.

In 2001 he established another free super-speciality hospital in Bangalore to benefit the poor. The Vancouver Sun in 2001 reported that Sai Baba told his adherents not to browse the Internet after Sai Baba said, "These teachings (the Vedas) are highly sacred. Today people are ready to believe all that they see on television and internet but do not repose their faith in the Vedic declarations. Internet is like a waste paper basket. Follow the 'innernet,' not the internet."

In 2003, Sai Baba suffered a fractured hip when a student standing on an iron stool slipped and the boy and stool both fell on him. After that he gave darshana from a car or his porte chair. After 2004, Sai Baba used a wheelchair and began to make fewer public appearances.

On 28 March 2011, Sai Baba was admitted to the Sri Sathya Sai Super Speciality Hospital at Prashantigram at Puttaparthi, following respiration-related problems. After nearly a month of hospitalisation, during which his condition progressively deteriorated, Sai Baba died on Sunday, 24 April at 7:40 IST, aged 84.

Sai Baba had predicted that he would die at age 96 and would remain healthy until then. After he died, some devotees suggested, incorrectly, that he might have been referring to that many lunar years, as counted by Telugu-speaking Hindus, rather than solar years, and using the Indian way of accounting for age, which counts the year to come as part of the person's life. Other devotees have spoken of his anticipated resurrection, reincarnation or awakening.

His body lay in state for two days and was buried with full state honours on 27 April 2011. An estimated 500,000 people attended the burial, among them the Indian Prime Minister Manmohan Singh, Congress president Sonia Gandhi, then Gujarat Chief Minister Narendra Modi (India's future Prime Minister), Cricketer Sachin Tendulkar and Union Ministers S. M. Krishna and Ambika Soni, as well as other political leaders and prominent figures.

Sai Baba's death triggered an outpouring of grief from followers who included Indian politicians, movie stars, athletes and indu