His film directorial debut was Gher Betha Ganga in 1962. Benegal shot to fame with Ankur 1973, which introduced Shabana Azmi, who also starred in Nishant 1975. He was awarded the Padma Shri in 1976 and the Padma Bhushan in 1991.

The success that New India Cinema enjoyed in the 1970s and early 1980s could largely be attributed to Shyam Benegal's quartet Ankur (1973), Nishant (1975), Manthan (1976) and Bhumika (1977), which were artistically superior yet commercially viable films. Tapping fresh talent mainly from the FTII and NSD like Shabana Azmi, Naseeruddin Shah, Om Puri, Smita Patil, Kulbhushan Kharbanda and Amrish Puri, Benegal has made several sensitive and stimulating films.

Benegal is related to the famous film director and actor Guru Dutt Padukone - contrary to what is generally believed. His paternal grand-mother and Guru Dutt's maternal grand-mother were sisters. Both are nominally Konkani speaking Chitrapur Saraswats.

Founder of the Hyderabad Film Society and a former Ad Filmmaker, Ankur, his first feature film, is set in rural South India where Surya, a zamindar's son arrives from the city to oversee his father's estate. Bored and sexually frustrated, he seduces his attractive maidservant, wife of a deaf-mute labourer. The discovery of the maidservant's pregnancy and the arrival of Surya's wife who senses her husband's involvement bring matters to a head. The film is memorable for its engrossing details of rural life and its exposure of the feudal system that is brutal and indifferent and is helped by a powerful film debut by Shabana Azmi as the maidservant. Ankur not only won several awards including the National Award for Shabana but also had a good showing at the Box Office.

With Nishant, where a teacher's wife is abducted and gang-raped by four zamindars and officialdom turns a deaf ear to the distraught husband's pleas for help and Manthan, set against the backdrop of Gujarat's fledgling dairy industry, Benegal continued to address the viewer in a strict cinematic language bereft of commercial skills. (5 lakh farmers in the state, each of whom contributed 2 Rs, produced the latter film! They came in truckloads to see 'their film' once released thereby making it extremely successful at the box office!)

Bhumika looks at an individual's search for identity and self-fulfillment. The film is broadly based on the life of well-known Marathi Stage and screen actresses of the 1940s, Hansa Wadkar who led a flamboyant and unconventional life. To quote film critic Derek Malcolm

"…What Benegal has done is to paint a magnificent visual recreation of those extraordinary days and one that is also sensitive to the agonies and predicament of a talented woman whose need for security was only matched by her insistence on freedom."

Unlike most New Cinema Filmmakers Benegal has had private backers for many of his films. Following the success of these four films, he was backed by film star Shashi Kapoor for whom he made Junoon (1979) and Kalyug (1981). The former set in the turbulent period of the Indian Mutiny of 1857 is one of Benegal's most stylish films and one which is meticulously detailed and visually arresting and one that gave him much satisfaction but Kalyug, a complex narrative based on the Mahabharat in spite of some great moments doesn't quite come off.

In the 1980s however with the collapse of the New Cinema, Benegal's films have not had proper releases and the 1980s also saw him turn to TV where he directed serials like Yatra (1986) for the Indian Railways, and of course one of the biggest projects undertaken on Indian Television, Bharat ek Khoj (1988) a serial based on Nehru's Discovery of India.