Born in Sligo, MacSharry was educated at the local national school before later briefly attending Summerhill College. After leaving school he worked as a livestock dealer throughout Sligo and Mayo before becoming involved in the Meat Exporters Factory in his native town. MacSharry also owned his own haulage firm.
MacSharry came from a non-political family, however, he himself became an active member of Fianna Fáil in Sligo. In 1967 he made his first move into politics when he secured election to both Sligo Borough Council and Sligo County Council. It was from this local base that MacSharry launched his national election campaign.
MacSharry was first elected to Dáil Éireann as a Fianna Fáil Teachta Dála (TD) for the Sligo–Leitrim constituency at the 1969 general election. It was a fourth general election triumph in succession for the party, however, he spent his first term on the backbenches. MacSharry was re-elected to the Dáil at the 1973 general election, however, Fianna Fáil were out of power as a Fine Gael-Labour Party government came to power.
In Jack Lynch's subsequent front bench reshuffle, MacSharry was appointed opposition spokesperson on the Office of Public Works.
Following the 1977 general election, Fianna Fáil returned to government with a massive twenty-seat Dáil majority. In spite of entering his third term MacSharry was left on the backbenches. With the introduction of the new Minister of State positions in 1978, he finally secured a junior ministerial post, as Minister of State at the Department of the Public Service.
In 1979 Jack Lynch suddenly announced his resignation as Taoiseach and as Fianna Fáil leader. The subsequent leadership contest was a straight battle between George Colley and Charles Haughey. Colley was the favoured choice of the outgoing leadership and of the majority of the cabinet while Haughey had the backing of a large rump of backbench TDs who had become disillusioned with the party leadership. MacSharry, in spite of serving as junior minister to Colley, was one of the strongest supporters of Haughey and even ended up nominating him for the position of party leader. Haughey succeeded in becoming party leader, albeit by a narrow margin of just six votes, and was later elected Taoiseach by the Dáil.
MacSharry's loyalty was subsequently rewarded when he was appointed Minister for Agriculture in the new government. Agriculture was viewed as a key portfolio in Haughey's new cabinet and MacSharry was regarded as an effective minister at a time when farm prices were falling. He was also successful in agricultural negotiations with the EEC.
Following the 1981 general election Fianna Fáil were out of power. In the new Fianna Fáil front bench MacSharry was retained as spokesperson for agriculture but a later reshuffle saw him move to fisheries.
Fianna Fáil returned to government following the February 1982 general election and MacSharry was promoted to the positions of Tánaiste and Minister for Finance. At a time when Ireland was going through a recession, MacSharry introduced a budget which increased income tax at all levels. It was his only budget as the government fell after just nine months in office and a new coalition government of Fine Gael and the Labour Party took office.
In 1983 MacSharry resigned from the Fianna Fáil front bench due to a telephone-tapping controversy, when it was revealed that as Tánaiste and Minister for Finance, he had borrowed police tape recorders to secretly record conversations with a cabinet colleague. He defended his action by saying that rumours were sweeping the party that he could be 'bought' (bribed) to support efforts to depose Haughey; he claimed he used the equipment to record any attempts made to offer bribes. The scandal was however primarily focused on the decision by the Minister for Justice, Seán Doherty, to bug the phones of two leading political journalists to discover their anti-Haughey sources. MacSharry was a secondary but high-profile casualty of the scandal, as the equipment he had used had been supplied by Doherty, who had requested it from Assistant Garda Commissioner Joseph Ainsworth. Ainsworth was also forced to resign when the scandal reached the headlines.
MacSharry spent a number of years in the political wilderness following the phone-tapping scandal. He was elected to the European Parliament as a Member of the European Parliament (MEP) for Connacht–Ulster in 1984.
Following the 1987 general election MacSharry was returned to the Dáil once again. He resigned his European Parliament seat when he was appointed Minister for Finance in Haughey's new government. During his second tenure in charge of finance, MacSharry committed himself to bringing order to the public finances and the poor economic situation. His ruthless cutting of state spending earned him the nickname Mack the Knife.
During this time he came to be identified as Haughey's heir apparent as Taoiseach and Fianna Fáil leader. MacSharry, however, had no such aspirations and had actually wanted to leave politics by the time he was forty-five. He was now fifty and had achieved some of the highest offices in the Irish government. In 1988 MacSharry's loyalty to Haughey was rewarded when he was appointed European Commissioner. As a result of this he resigned his Dáil seat and ended his domestic political career.
MacSharry is well known as the first commissioner of agriculture to be able to work out a meaningful compromise on reform of the Common Agricultural Policy in 1992. The MacSharry reforms as they are known, mark the turning point between the old CAP policy, and the new, although many other reforms followed his.
Following the completion of his term as Commissioner, MacSharry retired from politics to pursue business interests. He is currently a director on the boards of a variety of companies including Bank of Ireland and Ryanair Holdings. In 1999 he was appointed chairman of Eircom plc. MacSharry is also a member of the Comite d'Honneur of the Institute of European Affairs.
MacSharry is a non-executive director of Irish Life and Permanent and receives pension payments of €88,936 every year.
MacSharry is married to Elaine and the couple had six children. One of his sons, Marc MacSharry has served as Councillor on Sligo County Council, as a Senator in Seanad Éireann representing the Industrial and Commercial Panel but resigned upon being elected as a Teachta Dála for the constituency of Sligo-Leitrim. His nephew Tom MacSharry was a Councillor on Sligo Borough Council, 2004–09, and served as Mayor in 2006–07.