Schygulla was born in Königshütte (now Chorzów, Poland) to German parents Antonie (née Mzyk) and Joseph Schygulla. Both the names Schygulla (also spelled Szyguła) and Mzyk are of Polish/Silesian origin, indicating a mixed heritage and/or the process of teutonisation of Slavs as was very Common in Silesia in the 19th century. Her father, a timber merchant by profession, was drafted as an infantryman in the German Army and was captured by American forces in Italy, subsequently being held as a prisoner of war until 1948. In 1945, Schygulla and her mother arrived as refugees in Munich, following the expulsion of the majority German-speaking population of Königshütte by Communist Poland. Much later, in the 1960s, Schygulla studied Romance languages and German studies, while taking acting lessons in Munich during her spare time.
Acting eventually became her focus, and she became particularly known for her film work with Rainer Werner Fassbinder. During the making of Effi Briest (1974), an adaptation of a German novel by Theodor Fontane, Fassbinder and Schygulla fell out over divergent interpretations of the character. Another issue for Schygulla was low pay, and she led a revolt against Fassbinder during the making of Effi Briest, shot in September 1972 some time before its commercial release. His response was typically blunt: "I can't stand the sight of your face any more. You bust my balls". They did not work together again for several years until The Marriage of Maria Braun in 1978. The film was entered into the 29th Berlin International Film Festival, where she won the Silver Bear for Best Actress for her performance. In 1980 she acted in Fassbinder's miniseries adaptation of Berlin Alexanderplatz.
In 1981 Schygulla starred alongside Bruno Ganz in Volker Schlöndorff's Circle of Deceit, and the following year with Isabelle Huppert in Jean-Luc Godard's Passion. She was a member of the jury at the 15th Moscow International Film Festival in 1987.
In the 1990s she became a well-known chanson singer. In Juliane Lorenz's documentary film Life, Love and Celluloid (1998), on Fassbinder and related topics, Schygulla performs several songs.
Schygulla appeared in the 2000 Béla Tarr film Werckmeister Harmonies, and in 2002 in VB51, a performance by the Artist Vanessa Beecroft. Five years later, she appeared in the film The Edge of Heaven, directed by Fatih Akın, to wide acclaim.
In 2007 she received the Honorary Award from the Antalya Golden Orange Film Festival and in 2010 she received the Honorary Golden Bear from the Berlin Film Festival. In 2011 she acted in the Alexander Sokurov film Faust. Schygulla lived in Paris from 1981 to 2014, when she left for Berlin.
In 2018 she appeared in the French drama film The Prayer by Cédric Kahn. It was screened in the main competition section at the 68th Berlin International Film Festival.
