Born in Dublin, Ireland, Oldfield was raised in the Roman Catholic faith of her mother, Maureen. Spending her childhood in Reading, Berkshire, Oldfield studied ballet from the age of four and won numerous competitions in all styles of dance, including ballet, tap and modern. At the age of eleven, she won a scholarship to the Royal Academy of Dancing, then located in Holland Park, London, and two years later was starred to move on to the Royal Ballet School at White Lodge. However, she gave up ballet two years later, and achieved three A-Levels at Grade A. She studied classical piano to Grade 7. All her school years were spent at St Joseph's Convent School, Reading, where she became friends with Marianne Faithfull. Oldfield read English Literature and Philosophy at Bristol University.
Oldfield's musical career started in early 1968, when she made some demo recordings with her younger brother Mike Oldfield. These sessions were suggested and overseen by Mick Jagger. It is not known what became of those recordings.
Soon after this she founded the folk music duo The Sallyangie together with her brother Mike. The duo was signed to Transatlantic Records and recorded their only album at the recommendation of Pentangle band guitarist, John Renbourn, whom Oldfield met at the Troubadour Folk Club in Bristol. The album Children of the Sun was recorded in August 1968. The songs on it are mainly co-written by Sally and Mike Oldfield, and the album contained some of her brother's early guitar work. Guesting were Terry Cox on drums and Ray Warleigh on flute.
Oldfield's first mainstream recorded release was by a Finnish bass player named Pekka Pohjola. This album was mainly recorded at her brother's studio Througham Slad, Gloucestershire, between 22 November - 5 December 1976 and was originally released in 1977 as Keesojen Lehto by Pekka Pohjola. Later different labels translated the titles and changed the artist's name due to the name recognition of Mike and Sally Oldfield.
Oldfield's debut solo album, Water Bearer, was released in 1978. Her song, "Mirrors", was on the album. It peaked at #12 in the UK Singles Chart, spanning 1978 and 1979, and remained in that chart for thirteen weeks. Since then, she has released fifteen solo albums.
On the demise of her record label Bronze Records in 1984, Oldfield relocated to Germany and based her musical career there. Most of her albums from 1983 onwards were not released in the UK. She worked with many German record producers and musicians, including Gunther Mende and Candy DeRouge. Oldfield regularly appeared on national television and radio, and undertook several European concert tours, the last being in Germany in 2003.
Oldfield provided background vocals in sections of brother Mike's 1970s albums Tubular Bells, Ommadawn and Incantations. She reprised her role on Tr3s Lunas in 2002 and for the 2003 re-recording, Tubular Bells 2003. In addition, she worked on her other brother Terry's recordings. She sang "Shadow of the Hierophant" on Steve Hackett's 1975 album, Voyage of the Acolyte. On her 1988 CD album "Instincts", released by CBS Records UK, she did a vocal duet with Justin Hayward of The Moody Blues, titled "Let It Begin", which was a hit in the UK and Europe, and was a popular music video.