David Steel was born in Fife, the son of a Church of Scotland minister also called David Steel, who would later serve as Moderator of the General Assembly of the Church of Scotland. He was brought up in Scotland and Kenya. He first took an active part in Liberal politics at the University of Edinburgh, and after graduating in Law worked for the Scottish Liberal Party and then the BBC before being elected to the House of Commons at the Roxburgh, Selkirk and Peebles by-election of 1965. He represented this seat until 1983, when he became member for Tweedale, Ettrick and Lauderdale, a new constituency covering some of the same territory.
As an MP he was responsible for introducing, as a Private Member's Bill, the Abortion Act 1967 (see Abortion in the United Kingdom). He also became the Liberal Party's spokesman on employment, and in 1970 its Chief Whip.
He became Liberal leader in 1976 after the downfall of Jeremy Thorpe. In 1977 he led the Liberals into the "Lib-Lab Pact" by which they agreed to keep the Labour government in power. The unpopularity of the Labour government rubbed off on the Liberals, and Steel's first election as leader, the 1979 general election, saw a decline in Liberal fortunes.
In 1981 a group of Labour moderates left their party to form the Social Democratic Party, and joined the Liberals in the SDP-Liberal Alliance, an electoral alliance which was so promising in its early days that Steel was able to tell the Liberal Assembly to "prepare for government". After the 1988 merger with the SDP, of which he was the chief proponent, Steel was briefly joint interim leader of the Social and Liberal Democrats (as the new party was at first called), before becoming the party's Foreign Affairs spokesman. He was knighted (KBE) in 1990.
He retired from the House of Commons at the 1997 general election and was made a life peer in the same year. He campaigned for Scottish devolution, and in 1999 was elected to the Scottish Parliament as a Liberal Democrat member for Lothians. He became the first Presiding Officer (speaker) of the Scottish Parliament on May 12, 1999. In this role he was known as Sir David Steel, despite his peerage, and had no party allegiance. He stepped down as an MSP when the parliament was dissolved for the 2003 election, but remained as Presiding Officer until he had supervised the election of his successor on May 7 of that year.
George Reid succeeded Steel as Presiding Officer.