Dr. Muhammad Shahidullah was born in the village Peyara, 24 Pargana, West Bengal (now in India). His father Mafizuddin Ahmed was a warden of a shrine.

Muhammad Shaidullah passed his school finals (known as Entrance examination at that time) in 1904 from Howrah Zila School. In 1906 he passed the FA exam (equivalent to HSC) from Presidency College, Kolkata. He received the Bachelor of Arts degree with Honors in Sanskrit in 1910 from City College, Kolkata, and Master of Arts in 1912 in Comparative Philology from the University of Calcutta. He also received a PhD from Sorbonne university.

Shahidullah's teaching career started in Jessore Zilla School where he taught between 1908 and 1909. He also worked as the headmaster of Sitakunda High School, Chittagong between 1914 and 1915. However, he returned to research and worked as Sharatchandra Lahiri Research Fellow (1919-21) under the supervision of Prof. Dinesh Chandra Sen at the University of Calcutta. Subsequently, Shahidullah joined the University of Dhaka as a lecturer of Sanskrit and Bangla languages in 1921 . His years at the University of Dhaka constituted the most important period of his life. During his teaching and research career there, he explored the origins of the Bangla language. In 1925, he was able to show that Bangla originated from Gaudi or Magadhan Prakrit (or derivative of Sanskrit). To pursue his doctoral studies, Muhammad Shahidullah went to France and Germany in 1926. He learnt Vedic Sanskrit, Buddhist Sanskrit, Comparative Philology, and Tibetan and ancient Persian language at University of Paris, and ancient Khotni, ancient Vedic Sanskrit and Prakrt at Freiburg University in Germany. He received his doctorate from the Sorbonne in Paris in 1928 for his research on the distiches of the Charyapada, the earliest extant specimens of Bangla language. Dr. Shahidullah was the first Indian Muslim to receive the doctorate degree. He also received a diploma for his fundamental research in phonetics from the University of Paris the same year. After completing his doctorate, he returned home and started teaching. When the Sanskrit and Bangla Department was split into two separate departments, he became head of the Bangla Department in 1937 and retired from this position in 1944. He became principal of Bogra Govt. Azizul Haque College after retirement. He then rejoined the Bangla Department of the University of Dhaka as a supernumerary teacher and taught there for six yeas as departmental head and dean of the Faculty of Arts and International Relation Department (as teacher of French language) (1953-55). He also worked as head of the Bangla and Sanskrit Department of the University of Rajshahi from 1955-58.