Shalhoub was born and raised in Green Bay, Wisconsin. His father, Joe Shalhoub, immigrated from Lebanon to the United States as an orphan at the age of 10. He married Shalhoub’s mother, Helen, a second-generation Lebanese-American, and founded a family grocery chain, starting with a store in downtown Green Bay.
The second youngest of the couple's 10 children, Shalhoub was introduced to the theater by an older sister, who put his name forward as an extra in a high school production of The King and I. Despite finding himself standing on the wrong side of the curtain during the final dress rehearsal, he became enamored with the theater. Shalhoub graduated from Green Bay East High School, where his senior peers named him the best dressed and most likely to succeed. In his senior year he suffered a setback, breaking his leg in a fall off the stage into the pit during a rehearsal. Recovering quickly, he was able to perform in the school's final play of the year. He graduated with a bachelor’s degree in drama from the University of Southern Maine in Portland, going on to earn a master's from the Yale School of Drama in 1980.
One of his first television roles was in 1991 as the Italian cabdriver Antonio Scarpacci in the sitcom Wings. Shalhoub was pleasantly surprised to land the role after having a recurring role in the second season. Shalhoub affected an Italian accent for the role. In the same time period, Shalhoub played physicist Dr. Chester Ray Banton in The X-Files second-season episode "Soft Light".
Shalhoub's film roles following his Wings breakout included an excitable producer in Barton Fink and a fast-talking lawyer in The Man Who Wasn't There (both directed by the Coen brothers), a linguistically unidentified cabby in Quick Change, a Cuban-American businessman in Primary Colors, a sleazy alien pawn shop owner in the Men in Black films, a sympathetic attorney in A Civil Action, a widowed father in Thir13en Ghosts, a cameo role in the film Gattaca, and a has-been television star in Galaxy Quest. He also had a co-starring role in the film Big Night, where he plays an Italian-speaking chef complete with accent. And in 1995 he had a role in the hit NBC sitcom Frasier in the episode "The Focus Group" as an Arab newsstand owner named Manu Habbib.
Shalhoub demonstrated his dramatic range in the 1998 big-budget thriller, The Siege, where he co-starred alongside Denzel Washington, Annette Bening, and Bruce Willis. His character, FBI Special Agent Frank Haddad, was of Middle Eastern descent and suffered discrimination after terrorist attacks in New York City.
He later returned to series television in 1999, this time in a lead role on Stark Raving Mad opposite Neil Patrick Harris. The show did not attract much of an audience and NBC canceled the series in July 2000.
After a two-year absence from the small screen, Shalhoub starred in another TV series, Monk, in which he portrays Adrian Monk, a brilliant Sherlock Holmes-type detective diagnosed with obsessive compulsive disorder, for USA Network. Michael Richards had been offered the role when the show was being considered for broadcast on ABC, which later reran the first season in 2002, but he eventually turned it down. Shalhoub was nominated for an Emmy Award for Outstanding Lead Actor in a Comedy Series in nine consecutive years from 2001 to 2009, winning in 2003, 2005, and 2006. He also took the Golden Globe award for Best Performance by an Actor in a Television Series - Musical or Comedy, in 2003.
