Sims was born in St. Louis, Missouri, but in the eighth grade he moved to Hooks, Texas, to live with his grandmother. Sims initially played baseball and grew up a St. Louis Cardinals fan. He showed no interest in football until moving to Texas. In three years of varsity football at Hooks High School, he rushed 1,128 times (a state record at the time, currently second behind Robert Strait) for 7,738 yards, including 441 carries in 1973 (another state record at the time, currently tied for second behind Ketric Sanford). Sims' 38 games with 100 yards or more rushing (1972-1974) is tied for third place in all-time Texas high school records (with Ken Hall and Steve Worster) behind Robert Strait's 41 games, and Wes Danaher's 43 100-yard games.
Sims attended the University of Oklahoma, where he played for coach Barry Switzer's Oklahoma Sooners football team from 1975 to 1979. After playing only one game in his freshman year of 1975, injuries kept Sims out of the lineup for most of his sophomore season, which allowed him to red-shirt to gain an extra year of eligibility. Injuries continued to plague Sims for half of his (red-shirt) sophomore season in 1977 (he rushed for only 545 yards total in two seasons in 1975 and 1977, plus one game in 1976.) In 1978, Sims rushed for 1,762 yards on 231 carries as a red-shirt junior, averaging 7.6 yards per carry. Including the postseason, Sims had 1,896 yards. Both the before and after bowl game totals led the NCAA. He also set a total yardage school record that stood until 2004, when freshman Adrian Peterson ran for 1,925 yards. Subsequently, Sims was awarded the Heisman Trophy for the 1978 season, becoming only the sixth junior to do so. He was runner-up for the Heisman the following season in 1979, coming in second to Charles White of USC.
In 1979, against then-unbeaten Nebraska, who had the No. 1 rushing defense in the country at the time, Sims ran for 247 yards and helped the Sooners to a 17–14 win. Including the bowl game he had 248 attempts for 1,670 yards, averaging 6.7 yards per carry, and scored 23 touchdowns. He also became the first running back in Big 8 Conference (now merged to form the Big 12 Conference) history to rush for 200-yards in three consecutive games, and had four 200-yard games in a single season.
After losing to the Arkansas Razorbacks 31–6 in 1978, Sims led the Sooners to two consecutive Orange Bowl titles in three straight appearances. In the Orange Bowl following the 1978 season, he rushed for 134 yards and scored two touchdowns in a 31–24 win over the Nebraska Cornhuskers. In his final game, he ran for 164 yards as Oklahoma beat the previously-undefeated Florida State Seminoles by a score of 24–7. Sims ended his career at OU with 3,813 yards; most of those yards came in his final two seasons.
As he expected, Sims was the first overall pick in the 1980 NFL Draft. He spent his career with the Detroit Lions, making the Pro Bowl in 1980, 1981, and 1982. Sims led Detroit to the playoffs in 1982 and 1983, but they lost in the first round in both appearances. In the 1983 wild card game at Candlestick Park against the San Francisco 49ers, Sims ran for 114 yards on 20 carries, but Joe Montana led the 49ers to a comeback victory, as Detroit kicker Eddie Murray missed a field goal in the waning moments.
Sims' career ultimately ended midway through the 1984 season when he suffered a catastrophic right knee injury in a game against the Minnesota Vikings on October 21. Sims finished his career with 1131 carries for 5106 yards (4.5 yards per carry), and 186 receptions for 2072 yards (11.1 yards per catch). He spent two years attempting to rehabilitate his knee before retiring in 1986. Sims remains a beloved former sports figure in Detroit. His number "20" was worn five years after his retirement by Barry Sanders, and is currently retired as an unofficial "Triumvirate" of the greatest Lions in the modern era to ever wear the number, which also includes Hall of Famedefensive backLem Barney.
In 1988, four years after the knee injury that forced his retirement, Sims announced he was attempting a comeback with the Lions for the 1989 season. Speaking with Detroit Free Press columnist Mitch Albom, Sims claimed to be "as fit as he was in 1983." He offered to play the season with a blank check, allowing Lions management to assess his value and fill in the salary amount accordingly. Sims hoped to meet with then-General Manager Russ Thomas and owner William Clay Ford, Sr. to discuss a spot on the team's roster. Despite some interest from Lions head coach Wayne Fontes, Sims never returned to the NFL.
When Billy Sims retired from the Lions in 1984, he received a $1.9 million insurance settlement from Lloyd's of London, in addition to the several million dollars he earned during his playing career. Sims lost his accumulated wealth through a series of failed business ventures. His numerous businesses included a nightclub, a radio station, a dry cleaner, and a car parts manufacturer.
In 1995, he sold his Heisman Trophy to Texas businessman Bob White, who had been a father figure to Sims since he was in the ninth grade; White's son played high school football with Sims. The trophy was sold to White with the agreement that it could be re-purchased by Sims by paying the original price plus 8.5% interest.
Sims began giving the "Boomer! Sooner!" Oklahoma cheer immediately following the naming of the winner at the Heisman Trophy induction ceremonies of the four most recent Oklahoma Sooner winners, Jason White , Sam Bradford, Baker Mayfield, and Kyler Murray and held up a sign reading "Boomer" during the 2009 Heisman ceremony. He was inducted into the College Football Hall of Fame in 1995. Sims is honored in Hooks with Billy Sims Road, and the local library displays a collection of his photos; Sims said while at Oklahoma that he preferred his home town to big cities. He maintains 54 Billy Sims Barbecue restaurants franchises with co-founder Jeff Jackson.