Rahi was born in Rawalpindi, British India, in 1938[7] to an Arain family during the British Raj.

His father, Subedar Major Abdul Majeed, was a retired officer from the British Indian Army.[8]

He began his film career in 1959 as a guest actor in the film Baghi. His first breakthrough came with the film Wehshi Jatt (1975). This was the unofficial prequel to Maula Jatt (1979). Maula Jatt was released on 11 February 1979, which became his most successful Pakistani film. His other works include Behram Daku (1980), Sher Khan (1981), Sala Sahib and Ghulami (1985).

Sultan Rahi appeared in key roles in over 535 film