Shankar was born on 17 August 1963 in Kumbakonam, Tamil Nadu to Muthulakshmi and Shanmugam. He completed his diploma in Mechanical Engineering from Central Polytechnic College before entering the film industry. He was roped into the film industry as a screenwriter by S. A. Chandrasekhar, who accidentally saw the drama stage shows made by Shankar and his team. Wanting to be an actor initially, he chose to be a director instead.
His second film Kadhalan, a romantic-action film was released in the following year, had Prabhu Deva in the lead role. In 1996, he collaborated with Kamal Haasan for Indian. It was dubbed in Hindi as Hindustani. The film was selected as the country's submission for the Academy Award for Best Foreign Language Film. Following Indian, Shankar began work on Jeans, which released in 1998 and became the most expensive film in Indian cinema at that time with a budget of ₹ 200 million. Upon release, it became one of the highest grossing Tamil films of the 1990s. He made his production debut through Mudhalvan (1999), was launched with Rajinikanth playing the lead. After the actor cited schedule conflicts, Arjun Sarja joined the project. At the same time, Shankar started to work on his next film which was supposed to be a science fiction film titled Robot, but the project could not move forward due to budgeting problems. Instead, he opted to remake Mudhalvan in Hindi as Nayak, thus making his Bollywood debut.
His musical entertainer film Boys was released in 2003, which received mixed response from the critics and audience, prompting it to do only average business. His psychological thrillerAnniyan, featuring Vikram in three distinct characters (Ambi, Remo & Anniyan) was released in 2005 with Harris Jayaraj as the composer for his film. Anniyan turned out to become the second highest grossing Tamil film of 2005. Shortly after the release of Anniyan, it was reported that Shankar had teamed up with Rajinikanth and AVM Productions for a film. He renewed his association with A. R. Rahman with the film. Sivaji was made at a budget of ₹ 600 million, the most expensive Indian film at that time. He was paid with a record salary of 10 crores for the film. After two years of filming, the film released in 2007. Ultimately it went on to become the highest grossing Tamil film of that time.
Following Sivaji, Shankar revisited the possibility of beginning his shelved science fiction venture. After initial discussions Shahrukh Khan and their subsequent differences of opinion regarding the script, he later decided to make the project in Tamil with Rajinikanth and Aishwarya Rai. The film was produced by South Indian media proprietor, Kalanithi Maran, was renamed as Enthiran and was made on a budget of ₹ 1.32 billion, the most expensive Indian film. Some reports also make it the highest grossing Indian film, although this cannot be independently verified. After initial reports indicating that Shankar's next film is entitled to be with Siddharth, Shankar started to work on Nanban, the Tamil remake of the 2009 Hindi film 3 Idiots starring Vijay, Jeeva and Srikanth. The film opened in January 2012. After Nanban, it was wrongly reported that Shankar's next film would be called Therdal. On 21 June 2012, Shankar announced his next film named I. A romantic thriller, the film revolved around a former body builder and model exacting revenge upon the people who turned him into a hunchback. Vikram played the lead role, collaborating with Shankar again after Anniyan (2005), while Amy Jackson was the female lead. The film, made over a period of two and half years, released on 14 January 2015 to mixed reviews but earned Rs.200 crores in 19 days. He is currently working on the production of 2.0, a sequel to Enthiran (2010).