Deepa Sahi was born in India in Dehradun. Her family later shifted to Canada but she continued to stay in India.
An alumnus of National School of Drama, Delhi, Sahi started off with a theater career, with strong Leftist leanings and social activism a core value of the productions she was involved with.
In her early film career she collaborated with noted auteur Govind Nihalani and made her debut with the 1984 film Party. This was well received, and she subsequently acted in Aghaat (1985). Her thespian achievement, however, will always remain her role as the independent-minded and empowered lower-caste Punjabi woman she played in the highly acclaimed television film Tamas (1986).
After marrying film director Ketan Mehta — also was a rising light of alternate Hindi cinema — she acted in several of his films including Hero Hiralal (1988), Maya Memsaab (1992) and Oh Darling! Yeh Hai India (1995). She wrote the screenplay for Oh Darling! Yeh Hai India.
Her other notable films include Hum (1991) and Ek Doctor Ki Maut (1991).
Her last film appearance was in Aar Ya Paar (1998) and she has not appeared in any films since.
In 2005 she co-produced her husband's film Mangal Pandey: The Rising which was a moderate success at the box office.
She got a Filmfare best supporting actress nominee for Hum and National Award(Jury) for Maya Memsaab.