Sarah Shahi was born in Grapevine, Texas, to a Iranian father and Spanish mother, Abbas and Mahmonir Jahansouz Shahi. She attended Trinity High School and Dallas' Southern Methodist University, majoring in English and Opera. Shahi started her career as a beauty queen during her teen years. She won the Miss Fort Worth USA pageant in 1997. After studying opera, she joined the Dallas Cowboys Cheerleaders 1999-2000 squad. She appeared on the cover of their 2000 calendar.

While working as an extra on the set of Dr. T and the Women, she met director Robert Altman, who encouraged her to move to Hollywood. Sarah then moved to Los Angeles. Once in L.A., she got various recurrent roles in several famous series, such as Alias, where she played Jenny, and Dawson's Creek, where she was Sadia Shaw. Shahi was also the first ghost in Supernatural, the CW paranormal drama series.

She is best known for her role as the Mexican-American DJ Carmen de la Pica Morales in the Showtime drama television series The L Word, which she joined in its second season. Her character was written out before the start of the fourth season.

She also appeared in HBO's The Sopranos, in the Season 6b episode "Kennedy and Heidi," as Sonya Aragon, a stripper and college student who spends a weekend with Tony after a death in his family.

Sarah speaks English, Persian, and some Spanish, and has a Brown belt in Karate.