Balabagan grew up in a poor Muslim family in Sultan Kudarat, Maguindanao, Maguindanao. She had 13 brothers and sisters but only six survived. Her siblings died due to disease and because of her family's financial constraints, it prevented them from availing adequate medical care. She worked for relatives at a young age to support her studies. She only managed to reach the fifth grade.
At age 14, Balabagan decided to work abroad. Her recruiter listed her age as 28 and managed to secure a job for her. She learnt of this falsification only when she was already on her flight to Dubai in the United Arab Emirates. She was tasked by contract to work for a 67 year old widower with four sons. Balabagan was anxious of the employment and convinced herself that her employers would respect her since she and they were Muslims.
This was later proven to be false, as Balabagan became a subject of unsolicited sexual advancements.
On July 19, 1994, she killed her employer, Almas Mohammed al-Baloushi, stabbing him 34 times. She alleged that he had tried to rape her, and that she was acting in self-defence.
On June 26, 1995, a court ruled that she was guilty of manslaughter as well a victim of rape. She was sentenced to seven years imprisonment and ordered to pay 150,000 dirhams (US$40,000) in blood money to al-Baloushi's relatives, while at the same time awarded 100,000 dirhams (US$27,000) as compensation for the rape. However, the prosecution appealed the verdict, calling for the death penalty. On September 6, 1995, a second Islamic court found no evidence of rape and convicted her of premeditated murder, sentencing her to death by firing squad. There was an international outcry and a defense campaign in several countries, as her case was seen as symbolising the ill-treatment of domestic servants in Arab states of the Persian Gulf, and just a few months earlier there had been the rather similar case of Flor Contemplación, a Filipina domestic worker who was hanged in Singapore that March.
Reportedly, it was only after a personal appeal for mercy by President of the United Arab Emirates Zayed bin Sultan Al Nahyan that al-Baloushi's family agreed to drop their execution demand in exchange for blood money. On October 30, at her third trial, her sentence was reduced to a year's imprisonment and 100 strokes of the cane, along with payment of blood money, which was donated by a Filipino businessman. She was caned in 20 strokes at a time over five days spanning January 30 – February 5, 1996. Philippine Ambassador Roy Señeres said "Balabagan said it was bearable. Embassy officials visited her twice afterward, and there were no marks or bruises or reddening." However, she later said that her injuries were more serious than she said at the time. She returned to the Philippines on August 1, 1996, to a hero's welcome.
Shortly after her release, Balabagan embarked on a career as a singer, appearing on a television programme with Geri Halliwell.
In 1998, she became a single parent after a brief relationship. In August 2003, she announced her engagement to Russell Vergara. She went on to have two more children. She later converted from Islam to Christianity after a Christian singer, Dulce Amor introduced her to Rev. Gasti Maribojoc, a pastor. She and Vergara divorced in 2010.
In 2013 she married June Sereno, and they have a child.
Balabagan's story was dramatised in the 1997 Philippine film The Sarah Balabagan Story. Directed by Joel Lamangan the Tagalog-language film starred Vina Morales in the title role which was initially offered to Balabagan herself but had declined. The government of the Philippines made several attempts to prevent the film from being shown lest it damage bilateral relations with the United Arab Emirates, and its release was delayed for several months.