Priyadarshan was born in Thiruvananthapuram, Kerala. Priyadarshan received his education at Government Model School and obtained an M.A. in Psychology from University College, Thiruvananthapuram. As the son of a college librarian, he was a voracious reader during his teenage years, and he started writing short plays and skits for Akashavani during his college days. His friends in those days included Mohanlal, M. G. Sreekumar, Suresh Kumar, Sanal Kumar, Jagadish, Maniyanpilla Raju and Ashok Kumar. It was then that Mohanlal got into movies. His friends followed him to Chennai, looking for a chance in movies. Priyadarshan, with the help of Mohanlal, got a few chances to work as assistant scriptwriter in a couple of movies and started writing scripts, with some turning into hits. Eventually, he had to come back to Kerala. In 1984, Priyadarshan, along with his close friends Suresh Kumar and Sanal Kumar, decided to produce a film. Mohanlal, who was by then a commercially viable star, was selected as the hero along with Shankar, the saleable hero. Thus in 1984, Priyadarshan made his debut as director with Poochakkoru Mookkuthi, which was a surprise hit. A slapstick comedy film shot on a low budget, it completed a successful run of 100 days in Kerala theatres. Priyadarshan is married to Malayalam actress Lissy.

Priyadarshan made his debut in both Tamil and Telugu cinema with Gopura Vasalile in Tamil in 1991 and Nirnayam in Telugu in 1992 respectively. Nirnayam was a remake of his earlier Malayalam film Vandanam. In the year 1992, Priyadarshan made his debut in Bollywood with Muskurahat, again remake of his own Malayalam film Kilukkam which ended up as a disastrous flop. In 1993, he made a comeback in Hindi with Gardish, an adaptation of the Malayalam film Kireedom, which was originally directed by Sibi Malayil. Priyadarshan successfully added ingredients required for Hindi audiences and the film was a huge hit, opening the doors of Bollywood to him. The success of Virasat made Priyadarshan a household name in Hindi cinema.