She worked in repertory during the 1950s and made her West End debut in 1958, replacing Joan Sims in the play Breath of Spring. She then appeared in Joan Littlewood's Theatre Workshop production of Make Me An Offer in 1959, and her other early West End appearances included the revue One Over the Eight with Kenneth Williams in 1961 and starring in Rattle of a Simple Man in 1962. In 1965 she made her Broadway debut in Entertaining Mr Sloane. In 1978 she played Miss Hannigan in the original London cast of the musical Annie and two years later she played Mrs Lovett in the original London production of the musical Sweeney Todd.

She appeared in The Winter's Tale, Titus Andronicus and A Delicate Balance for the Royal Shakespeare Company. At the National Theatre she appeared in The Cherry Orchard and The Duchess of Malfi. She also directed A Midsummer Night's Dream for the RSC on tour and was the first female director at the National, with The Critic.

In 2006 she played the role of Fraulein Schneider in the West End revival of the musical Cabaret at the Lyric Theatre. For this role she won the Laurence Olivier Award for Best Performance in a Supporting Role In A Musical. In 2009 she spent over a year playing Mother Superior in Sister Act the Musical at the London Palladium.

Her first big television role was playing Carol in the BBC sitcom The Rag Trade in the early 1960s. She also played the lead roles in the sitcoms The Bed-Sit Girl, Mr Digby Darling and Now Take My Wife. Her other television credits include Doctor Who, Kavanagh QC (opposite her husband, John Thaw), EastEnders, The Russian Bride, Brighton Belles, Bedtime, Fortysomething, Bleak House, New Tricks and The Catherine Tate Show. In 2008 she played the part of a terminally ill patient who's travelled to Switzerland to have an assisted suicide in one of The Last Word monologues for the BBC. In 2009 she played Liz in The Rain Has Stopped, part of the BBC daytime mini-series Moving On.

She has appeared in numerous films, including The Girl on the Boat (1961), Carry On Cleo (1964), The Anniversary (1968), The Wildcats of St Trinian's (1980), Buster (1988), Love and Death on Long Island (1997) and The Boy in the Striped Pyjamas (2008).

She has also made guest appearances on television shows like Grumpy Old Women, Room 101 and Have I Got News For You. On radio she has been a semi-regular contestant on the BBC Radio 4 panel game Just a Minute since 1967.

In March-May 2010 she appeared as a judge on the BBC show Over the Rainbow, along with Charlotte Church, Andrew Lloyd Webber and John Partridge. The show attempted to find a member of the public to play Dorothy in a new West End production of The Wizard of Oz. The winner was Danielle Hope.

Since May 2007, Sheila Hancock has been Chancellor of the University of Portsmouth.

Hancock was married to actor Alec Ross from 1954 until his death from oesophageal cancer in 1971. They had one daughter, Melanie, born in 1964. In 1973 Hancock married actor John Thaw. He adopted Melanie and they had another daughter, Joanna. Thaw's daughter Abigail, from his first marriage, also joined their family. All three of their children have become actresses.

She was married to Thaw until his death from oesophageal cancer on 21 February 2002. Hancock herself was diagnosed with breast cancer during the late 1980s but made a full recovery. Her 2004 book, The Two of Us is a dual biography, which gives accounts of both their lives, as well as focusing on their 28-year marriage. This was followed by the 2008 book, Just Me, an account of coming to terms with widowhood. She has seven grandchildren.