Shelby was born in Birmingham, Alabama, the son of Alice L. (née Skinner) and Ozie Houston Shelby. He graduated in 1953 from Hueytown High School in Hueytown, Alabama, then the University of Alabama, receiving an undergraduate degree in 1957. He attended the Birmingham School of Law, where he earned his Juris Doctor in 1961. He was admitted to the Alabama State Bar on August 29, 1961. He received an LL.B. from The University of Alabama in 1963.

Shelby was elected to the Alabama Senate in 1970 and served until 1978. That year he ran for and was elected to the U.S. House of Representatives from the Tuscaloosa-based 7th district from which Congressman Walter Flowers was retiring. He was re-elected three times. Shelby was one of the more Conservative Democrats in Congress, and a member of the boll weevils, a group of moderate to conservative-leaning Democrats who often worked with Republican President Ronald Reagan on defense issues.

In the 1986 U.S. Senate election in Alabama, Shelby won the Democratic nomination for the Senate seat held by Republican Jeremiah Denton, the first Republican elected to the Senate from Alabama since Reconstruction. He won a very close race as the Democrats regained control of the Senate. He was easily re-elected in 1992 even as Bill Clinton lost Alabama’s electoral votes.

In 1987, Shelby opposed President Reagan’s nomination of Robert Bork to the Supreme Court, a move attributed to lobbying by Alabama African-American leaders who reminded Shelby that he had relied on support from black voters in narrowly defeating Denton in 1986. However, in 1991, Shelby supported President George H. W. Bush’s conservative Supreme Court nominee Clarence Thomas.

In 1991, Shelby sponsored legislation granting federal recognition to the MOWA Band of Choctaw Indians. Though confident it would pass, Shelby stressed the “need to get more documentation regarding establishment of their tribal identity.” The Senate Select Committee on Indian Affairs voted 11 to 2 in favor of the legislation on July 18.

In 1991 Shelby supported the 1991 Crime Bill S.1241 sponsored by then Senator Joseph Biden that instituted a national waiting period for handgun purchases as well as a federal ban on semi-automatic firearms.

In January 1992, Shelby met with Chair of the Federal Reserve Alan Greenspan, advocating for the basic cost of money being reduced from 3.5 percent to 3 percent to assist with the stimulation of the economy. Shelby confirmed afterward that he intended to vote for Greenspan for another term as Federal Reserve Chair and said that Greenspan was not opposed to his suggestion to cut the discount rate to its lowest in twenty years in addition to agreeing with him on the need for a restoration of investment tax credits and a special tax rate for capital gains along with the providing of incentives to encourage savings.

On November 9, 1994, Shelby switched his party affiliation to Republican, one day after the Republican Revolution in which they won control of both houses in the midterm elections, giving the Republicans a 53–47 majority in the Senate. He won his first full term as a Republican in 1998 by a large margin. He has since faced no significant opposition in 2004 or 2010. He was re-elected to a sixth term in 2016.

Shelby served on the Senate Select Committee on Intelligence from 1995 to 2003, stepping down because of a Senate rule limiting committee terms to eight years. Shelby took an adversarial stance toward the intelligence community during both Clinton and Bush administrations. He helped sink Anthony Lake’s nomination as CIA director in 1997 and promised to investigate the use of American-made satellites by the Chinese to gather intelligence. Shelby took a hard line on leaks of classified information. In 2000 he introduced a bill (vetoed by President Clinton) “that would have broadened the law that criminalizes release of national defense information.” According to the Washington Post:

In 1999, he opposed the Gramm–Leach–Bliley Act, which repealed parts of the Glass–Steagall Legislation, and was the only Republican Senator and one of eight Senators overall to vote against it.

In 1999, Shelby was one of ten Republican senators to vote for the acquittal of President Bill Clinton on the charge of perjury when Clinton was tried in the Senate in 1999, although he voted for Clinton’s conviction on the charge of obstruction of justice.

In December 2002, Shelby said, “We don’t need another nuclear power — not with Iran sponsoring terrorism that it has in the past. The fact that they are seemingly pursuing an avenue to build nuclear weapons should be disturbing to everybody.”

In 2004, a federal investigation concluded that Shelby revealed classified information to the media when he was a member of the Senate Intelligence Committee. Specifically, Shelby revealed classified information on June 19, 2002 to Carl Cameron, the chief political correspondent on Fox News. The information consisted of two messages between Al-Qaeda operatives intercepted by the National Security Agency on September 10, 2001, but not translated until the day after the attacks—”the match is about to begin” and “tomorrow is zero hour.” The Department of Justice declined to file criminal charges against Shelby and transferred the case to the Senate Ethics Committee. The committee in 2005 concluded its probe into the alleged leak.

Shelby was highly critical of CIA Director George Tenet in the aftermath of the September 11 attacks. From 2003 until 2007, he chaired the Senate Committee on Banking, Housing and Urban Affairs. He is a member of the Appropriations Committee where he chaired its subcommittee on Commerce, Justice and Science and Special Committee on Aging. He lost his chairmanships in 2007 when the Democrats regained control of the Senate.

Both during the George W. Bush administration, in 2008, and the Obama administration, beginning in 2009, Shelby was vocal in his opposition to bailing out the banks and other corporations (such as AIG).

A September 2009 poll showed Shelby had a 58% approval rating, with 35% disapproving.

In March 2009, as the Obama administration was expected to reverse limits on embryonic stem-cell research imposed by the Bush administration, Shelby said, “My basic tenet here is I don’t think we should create life to enhance life and to do research and so forth. I know that people argue there are other ways. I think we should continue our biomedical research everywhere we can, but we should have some ethics about it.” Later that month, Shelby was one of fourteen senators to vote against a procedural move that essentially guarantees a major expansion of a national service corps. The bill was estimated by the Congressional Budget Office to cost at least an outlay for the fiscal year 2010 of $418 million toward around $5.7 billion from 2010 through 2014.

Shelby opposed President Barack Obama’s health reform legislation; he voted against the Patient Protection and Affordable Care Act in December 2009, and he voted against the Health Care and Education Reconciliation Act of 2010.

In August 2009, Shelby opined that the United States had “the best health care system in the world” and cited the need to expand the system without destroying it.

In February 2010, Shelby placed a hold on more than 70 of President Obama’s nominees to various government posts, in a protest over an Air Force KC-135 Stratotanker contract and the FBI’s Terrorist Explosive Device Analytical Center. Shelby lifted all but three of the holds 3 days later, saying that “The purpose of placing numerous holds was to get the White House’s attention on two issues that are critical to our national security—the Air Force’s aerial refueling tanker acquisition and the FBI’s Terrorist Device Analytical Center (TEDAC). With that accomplished, Sen. Shelby has decided to release his holds on all but a few nominees directly related to the Air Force tanker acquisition until the new Request for Proposal is issued.” White House spokesman Robert Gibbs criticized Shelby for “hold[ing] up qualified nominees for positions that are needed because he didn’t get two earmarks”; Shelby denied the holds were over earmarks.

In 2010, Shelby initially opposed the Republican Party’s moratorium on earmark funding. That same year, Shelby voted to block three amendments to regulate banks, including an amendment #3812 to S. 3217 to cap ATM fees at $0.50 per transaction, and to bar banks borrowing taxpayer money through TARP funds to use those funds for their own benefit. Shelby also believes that bank oversight violates the right to privacy and is against the Government Office of Financial Research being able to collect the financial data it needs to regulate the bank industry.

In December 2010, Shelby was one of twenty-six senators who voted against the ratification of New Start, a nuclear arms reduction treaty between the United States and Russian Federation obliging both countries to have no more than 1,550 strategic warheads as well as 700 launchers deployed during the next seven years along with providing a continuation of on-site inspections that halted when START I expired the previous year. It was the first arms treaty with Russia in eight years.

In May 2011, Shelby was one of five Republicans to vote against a Republican bill expanding offshore oil and gas drilling in U.S. coastal waters and requiring the Interior Department to complete multiple offshore lease sales in the Gulf of Mexico and off the coasts of Virginia and Alaska.

In 2011, Shelby opposed the nomination of Nobel Economics Prize laureate and Massachusetts Institute of Technology professor Peter Diamond to serve on the board of the Federal Reserve, on the grounds that professor Diamond “lacked the necessary qualifications”. Since becoming Senate Banking Chairman Shelby has made “regulatory relief and financial regulation reform his top priority”. In May 2015, he revealed the so-called “Shelby Bill”, easing regulatory restrictions on smaller banks and increasing scrutiny of the Federal Reserve.

In 2014, The Wall Street Journal criticized Shelby for hoarding campaign and PAC contributions and not sharing them with other colleagues.

In March 2015, Shelby announced the Senate Banking, Housing, and Urban Affairs Committee would “review proposals aimed at providing greater clarity in Fed decision-making and at reforming the composition of Federal Reserve System” and that he had asked for input from the original regional reserve bank presidents for the Federal Reserve.

In May 2015, Shelby introduced legislation that if enacted would increase congressional scrutiny of the Federal Reserve and ease some regulatory burdens on multiple small banks and loosen oversight to banks such as U.S. Bancorp and SunTrust Banks enacted under the Dodd-Frank Act. In a written statement, Shelby referred to the legislation as “a working document intended to initiate a conversation with all members of the committee who are interested in reaching a bipartisan agreement to improve access to credit and to reduce the level of risk in our financial system.”

In March 2015, Shelby was one of forty-seven Republican senators to sign a letter to Iran warning that a nuclear deal with the United States would have to first be approved through Congress. In July, Shelby stated that the Joint Comprehensive Plan of Action was “a bad deal” and questioned why the United States would support the agreement if Russia President Vladimir Putin favored it.

In September 2016, Shelby was one of thirty-four senators to sign a letter to United States Secretary of State John Kerry advocating for the United States using “all available tools to dissuade Russia from continuing its airstrikes in Syria” from an Iranian airbase near Hamadan “that are clearly not in our interest” and stating that there should be clear enforcement by the US of the airstrikes violating “a legally binding Security Council Resolution” on Iran.

Shelby has an A+ rating from the National Rifle Association for his support of gun rights. In 2016, Shelby voted against the Feinstein Amendment, which sought to stop the sale of firearms to people known or suspected to be terrorists. Upon being asked by Scott Wapner on why he voted against it, Shelby said “I do believe that we should keep guns out of the hands of terrorists, would-be terrorists, and a lot of other people.”

In March 2017, Shelby referred to Supreme Court nominee Neil Gorsuch as “an outstanding nominee” who Republicans should make sure if Democrats wanted to filibuster and said he was not worried about the changes to the filibuster rules affecting the Senate, citing the Democrats as having used “nuclear option” first.

In December 2017, after Senate Judiciary Committee Chairman Chuck Grassley issued a statement requesting that the nomination of Brett Talley for federal judge in Alabama be withdrawn, a spokesman for Shelby stated that Shelby considered Talley “a great young attorney” and had spoken with him the previous week while asking “for his letter of withdrawal in hopes that Mr. Talley can gain more experience.”

In August 2017, Shelby co-sponsored the Israel Anti-Boycott Act (S.270), which made it a federal crime, punishable by a maximum sentence of 20 years imprisonment, for Americans to encourage or participate in boycotts against Israel and Israeli settlements in the occupied Palestinian territories if protesting actions by the Israeli government.

In September 2017, after the Senate reached an agreement during a lunch to not vote on a Republican bill to repeal the Affordable Care Act that week, Shelby said, “Why have a vote if you know what the outcome is and it’s not what you want. I don’t know what you gain from that. But I do believe that the health care issue is not dead, and that’s what counts.”

In August 2018, after Rand Paul proposed an amendment to tie a spending bill to the funding of Planned Parenthood, Shelby warned that the amendment could attract supporters while concurrently becoming a spoiler for a larger government spending bill.

In September 2018, Shelby reported that the House and Senate were close to a deal on a third package of spending bills for 2019. Representative Nita Lowey disputed the claim, saying that she did not believe a deal would be reached until after the House adjourned and a Republican aide in the House of Representatives responded that there was no time to complete the package.

In November 2018, Shelby, Senate Majority Leader Mitch McConnell, and John Thune met with President Trump at the White House, Shelby stating after the meeting that he told Trump the Republicans should avoid a partial government shutdown over Trump’s wishes for a border wall and that he was unsure of Trump’s position having been affected by his comments.

In March 2018, Shelby voted to table a resolution spearheaded by Bernie Sanders, Chris Murphy, and Mike Lee that would have required President Trump to withdraw American troops either in or influencing Yemen within the next 30 days unless they were combating Al-Qaeda.

In February 2019, after President Trump delivered the 2019 State of the Union Address, Shelby stated that the address was a reiterating of the president’s support for the U.S.-Mexico border wall and confirmed an interaction with House Appropriations Committee Chairwoman Nita Lowey, a leading Democratic negotiator.

In January 2019, Shelby was one of 31 Republican senators to cosponsor the Constitutional Concealed Carry Reciprocity Act, a bill introduced by John Cornyn and Ted Cruz that would grant individuals with concealed carry privileges in their home state the right to exercise this right in any other state with concealed carry laws while concurrently abiding by that state’s laws.

In September 2020, with less than two months to the next presidential election, Shelby supported an immediate Senate vote on President Trump’s nominee to fill the Supreme Court vacancy caused by the death of justice Ruth Bader Ginsburg. Previously in March 2016, Shelby refused to consider President Obama’s Supreme Court nominee, stating that the “decision should be made after the upcoming presidential election [later in 2016] so that the American people have a voice.”