Yuji Sakai was born in Adachi, Tokyo with two older brothers and an older sister. His father worked as a house painter, with Sakai revealing that he was also possibly a yakuza, while his mother was a strict disciplinarian and educator who worked in a factory. In his working-class neighborhood, the children looked up to baseball players and yakuza, with many of his neighbors being the latter. Sakai entered Meiji University and studied engineering, before dropping out at age 19. He went to the Asakusa district in 1972 to become a comedian. While working as an elevator operator at the Asakusa France-za striptease, he became an apprentice of its comedian Senzaburo Fukami and eventually the theater's MC.
Over his career, Sakai became increasingly critical of modern Japanese film, once stating: "It is because I love film so much that I hate those incompetent and uninteresting new movies." In contrast, he believed that even the worst movies were worth watching; he felt that all films had at least one redeeming feature, such as a well composed shot. Near the end of his life he did however show interest in the new style of film-making of Takeshi Kitano, to whom he referred as "the true successor to Kurosawa".
After dropping out of Meiji, Yuji attended Waseda University where he majored in literature. In his free time, he would transcribe music for various student groups at Waseda. It was during this time that Yuji, whose parents had only allowed him to listen to classical music, was introduced to rhythm by a friend of his who played drums in a school band. He spoke of this experience in an interview with Akihiro Tomita: "I thought my friend was a genius. I had heard drums on the radio before, but it was like I had never really noticed them. Then I see drums performed live, and was able to experience a beat for the first time. I started to take heavy interest in music that wasn’t classical and joined the band elective." Since Sakai worked in the animation industry, he only ever received instructions and storyboards from directors which helped him with composing. However, it is uncertain if all of his works were to be included in the finished project. He once said that this is a way he likes to work, for he did not have to deal with rules during composing.
Yuji lived the last years of his life in the Zen Nikku Hotel in Tokyo (now ANA InterContinental Tokyo), where he paid for his room in cash every 10 days. He continued working as the host of Sunday Western Movie Theatre until just weeks before his death.
Yuji Sakai died November 11, 1998 of heart failure. Yuji Sakai monogatari - Kobe-hen: Sainara, a biographical film depicting his life, directed by Nobuhiko Obayashi, was released the following year.