In 2005, LaBeouf made his transition into more mature roles with The Greatest Game Ever Played. In 2007, he starred as the leads in Disturbia and Transformers, and the following year he appeared in Indiana Jones and the Kingdom of the Crystal Skull as Indiana's son. In 2009, LaBeouf reprised his role as Sam Witwicky in the Transformers sequel Transformers: Revenge of the Fallen, and appeared in New York, I Love You. His upcoming films include the lead roles in Wall Street: Money Never Sleeps, Transformers 3 and The Associate. In 2004, he made his directorial debut by directing "Lets Love Hate" with Lorenzo Eduardo. Five years later he also directed Cage's music video for the single "I Never Knew You".

LaBeouf has been in one long-term relationship, which began in 2004 and lasted three years. He is currently in a relationship with Carey Mulligan; the two began dating in the summer of 2009. In November 2007, LaBeouf was arrested for misdemeanor criminal trespassing in a Chicago Walgreens after refusing to leave; the criminal charges were dropped the following month. In July 2008, LaBeouf was involved in a car accident, which was caused by the other driver. LaBeouf was arrested at the scene of the car accident for misdemeanor drunk driving, and his driver's license was suspended for one year because he refused a breathalyzer examination. As a result of the injuries he sustained from the accident, he has undergone multiple surgeries on his left hand, which has permanent damage and scarring.

LaBeouf was born in Los Angeles, California, the only child of Shayna (née Saide) and Jeffrey Craig LaBeouf. LaBeouf's mother is a dancer and ballerina turned visual artist and clothing jewelry designer; before she met LaBeouf's father, she ran a head shop in Brooklyn. LaBeouf's father is a Vietnam War veteran who "drifted" from job to job, working as a mime at a circus, a snow cone salesman, a rodeo clown, a stand-up comedian, and touring with the Doobie Brothers as their opening act. LaBeouf's New York-born mother is Jewish and his father is a Cajun (once described by LaBeouf as a "Ragin' Cajun"). LaBeouf was raised in his mother's Jewish religion and had a Bar Mitzvah, though he was also baptized. The name Shia is Hebrew for "gift from God" (שי-יה), and the surname LaBeouf is a corruption of "le bœuf", the French term for "the ox" or "the beef". LaBeouf has said that he comes from "five generations of performers" and was "acting when [he] came out of the womb." One of LaBeouf's great-grandmothers played piano in gangster Lucky Luciano’s casino. LaBeouf's maternal grandfather, a Polish-born Holocaust survivor who shared his first name, was a comedian who worked in the Borscht Belt of the Catskill Mountains and sidelined as a barber for the Mafia. LaBeouf's alcoholic paternal grandfather was a Green Beret in the military and LaBeouf's paternal grandmother was a Beatnik poet and lesbian who associated with Allen Ginsberg.

LaBeouf has described his parents as "hippies", his father as "tough as nails and a different breed of man", and his upbringing as similar to a "hippy lifestyle", stating that his parents were "pretty weird people, but they loved me and I loved them." LaBeouf's father used to grow cannabis, and the two smoked marijuana together when LaBeouf was ten years of age. LaBeouf has also said he was subjected to verbal and mental abuse by his father, who once pointed a gun at his son during a Vietnam War flashback. LaBeouf says his father was "on drugs" during his childhood and was placed in drug rehabilitation for heroin addiction while LaBeouf's mother was "trying to hold down the fort." His parents eventually divorced, mainly due to financial problems, and LaBeouf had what he has described as a "good childhood", growing up poor with his mother, who worked selling fabrics and brooches in Echo Park, Los Angeles, California. LaBeouf's uncle was going to adopt him at one stage because his parents could not afford to have him anymore and "they had too much pride to go on welfare or food stamps."

LaBeouf attended 32nd Street Visual and Performing Arts Magnet in Los Angeles (LAUSD) and Alexander Hamilton High School, although he received most of his education from tutors. Following high-school, LaBeouf was accepted to Yale University but declined, later saying, "[I am] getting the kind of education you don't get at school," although he would like to attend college. In a May 2009 Parade magazine interview, LaBeouf commented on how his parents' personal struggles, and his childhood, had an influence on him, "My dad and my mom were both artists who never found an audience for their artwork. And so I lived in poverty. Now that I'm not poor, I know that is what it was. Like Hemingway said, you can't write anything if you've never been shot at or been gorged by a bull, you know? So I look back at that stuff and I'm grateful. It's like scars. You become proud of them." In that same interview, LaBeouf explained that part of what he remembers is in 1988, when he was two, his dad began dressing him up as a clown and putting him to work shilling for the family's pushcart business. LaBeouf recalled, "It was a hustle. We’d walk around the neighborhood in full clown regalia [...] My embarrassment factor didn't exist. I had fun, because I knew that in the middle of a performance my parents couldn't fight. So, for sure, every day, there had to be some peaceful time for us, or we weren't going to make it through the week financially."

Prior to his acting career, LaBeouf's career as a comedian originated when he would "create things, story lines and fictitious tales" during his childhood; he practiced stand-up comedy around his neighborhood as an "escape" from a hostile environment. At the age of ten, he began performing stand-up and "talking dirty" at comedy clubs (including The Ice House in Pasadena), describing his appeal as having "disgustingly dirty" material and a "50-year-old mouth on the 10-year-old kid". LaBeouf, who described himself as an "insult comic", said that his comic material included talking about his first erection and cursing. LaBeouf commented on his stand-up comedy career, "I just knew that money was a solution to whatever the hell was going on in my household. With money, I and my family would have had more options. So I went after a job that I thought I could make the most money for a 10-year-old or an 11-year-old boy."' LaBeouf subsequently found agent Teresa Dahlquist, who is his agent as of June 2008, through the Yellow Pages. He was taken on after doing his stand-up act for her and pretending to be his own manager, promoting himself in the third person. LaBeouf has said that he initially became an actor because his family was broke, not because he wanted to pursue an acting career. He commented, "My humor came from seeing my parents have sex, smoke weed, my mom being naked—just weird hippie stuff, twisted R-rated humor. I’d get up there in my OshKosh B’Gosh outfit and my bowl haircut. I was a little kid with a Lenny Bruce mouth. That was the act. But there’s no money in stand-up comedy, so I went into acting." He began acting when he was 12 years old. His acting debut was on Caroline in the City, and he made guest appearances on popular television shows like Freaks and Geeks, The X-Files, Touched by an Angel, Jesse, and Suddenly Susan, all in 1999.

LaBeouf became well known among young audiences after playing Louis Stevens on the Disney Channel weekly program Even Stevens, a role for which he was cast three months after being signed by his agent. Even Stevens aired from 2000 to 2003 for three seasons; it ended with The Even Stevens Movie—a TV movie which premiered in June 2003, on the Disney Channel. In 2003, LaBeouf was awarded a Daytime Emmy Award for the role of Louis and has said, "[he] grew up on that show" and his childhood was "kind of lost", although being cast in the show was the "best thing" that has happened to him. His father, having just been released from rehab, served as LaBeouf's on-set parent and the two bonded. Around this time period, he pitched an arrangement to Disney inspired by his and his father's residence at motels. Disney bought the rights to the story, but the project, entitled Rent-A-Dad, has never moved out of development—presumably because the material may not have been suited to the family-oriented film studio. In 2001 he played Ronny Van Dussel, a rival of the main character, in the Disney Channel TV movie Hounded and the following year he appeared in another Disney Channel TV movie Tru Confessions, where he played a mentally challenged kid with a sister who made a documentary about his disability. Gary Marsh, President of Entertainment for Disney Channel Worldwide, described LaBeouf as giving an "unbelievable acting performance", and stated, "to this day I believe [that performance] gave him the leverage and credibility to get a lot of other roles." During this time, LaBeouf also appeared in sketch shows on The Tonight Show with Jay Leno.

In 2003, he appeared in another Disney production, Holes, as Stanley "Caveman" Yelnats IV, opposite Jon Voight. While filming Holes, Voight lent LaBeouf acting books that turned him on to the notion that acting could be about more than just a paycheck. Steven Spielberg was a fan of LaBeouf in Holes, saying he reminded him of a young Tom Hanks. The film was a sleeper hit, grossing $67 million worldwide, and was well-received by critics. That same year, he was heavily featured in the HBO documentary show Project Greenlight, which chronicled the making of the independent film The Battle of Shaker Heights, his first PG-13 film. In the film, LaBeouf played the lead role of troubled teen Kelly Ernswiler. The Battle of Shaker Heights was theatrically released on August 22, 2003, in limited release and had a poor box office performance. He also had minor roles in the films, Charlie's Angels: Full Throttle and Dumb and Dumberer: When Harry Met Lloyd.

In 2004, LaBeouf co-wrote and directed the short film Let's Love Hate with Lorenzo Eduardo, which was LaBeouf's directorial debut. Also in 2004, he played Farber, a minor role in I, Robot and, the following year, appeared in the action-horror film Constantine as Chas Kramer, a supporting character. LaBeouf made his transition into more mature roles, playing the lead role in the 2005 Disney film The Greatest Game Ever Played, as Francis Ouimet, a real-life golfer from a poor family who won the 1913 U.S. Open Championship. While reviewing the film, Jeff Vice of the Deseret News called LaBeouf a "terrific lead" and Randy Cordova of Arizona Republic felt that "LaBeouf isn't given much to work with" in the role of Francis. LaBeouf appeared in the 2006 ensemble drama Bobby as Cooper, a campaign volunteer for Robert F. Kennedy. In Bobby LaBeouf's character goes on a LSD trip and strips naked, showing his backside. LaBeouf said that his father helped him act out the scene involing him on a LSD trip, saying "My father was very descriptive about the high and what happens, and he broke down the timeline for me." He also stated that he never considered using a body double for the nude scene. As part of the cast of Bobby, he won a Hollywood Film Award for "Ensemble Of The Year", and was nominated for a Screen Actors Guild Award for "Outstanding Performance by a Cast in a Motion Picture". Also in 2006, LaBeouf played the younger version of Dito Montiel in A Guide to Recognizing Your Saints, the older version being played by Robert Downey, Jr. in a semi-autobiographical account of Montiel's upbringing in 1980s Astoria, Queens. In her review for the film, Lisa Schwarzbaum of Entertainment Weekly, described LaBeouf as being "lavishly talented".

2007 marked a significant turning point in LaBeouf's career, when he appeared in a string of blockbuster films. In 2007, LaBeouf starred in Disturbia, a thriller released on April 13. He played a teenager under house arrest who suspects that his neighbor is a serial killer. LaBeouf said his character was important to him because it is a "character-driven" role. The film was a sleeper hit and LaBeouf received positive reviews for the role, with The Buffalo News saying, he "has grown into an appealing, bright young actor who is able to simultaneously pull off [the character's] anger, remorse and intelligence", Kurt Loder of MTV wrote "[LaBeouf] gets his star ticket decisively punched", and the San Francisco Chronicle noted, "[LaBeouf is] fast becoming the best young actor in Hollywood". In comparing the film with Rear Window, the New York Daily News described LaBeouf's appeal as "more John Cusack than James Stewart". On April 14, he hosted Saturday Night Live with musical guest Avril Lavigne. He also provided the voice of the narrater Cody Maverick in the animated mockumentary film Surf's Up. The film was a commercial success, making $149 million worldwide. Also in 2007, he played teenager Sam Witwicky, who becomes involved in the Autobot-Decepticon war on Earth, in Michael Bay's Transformers, released on July 3. Executive producer Steven Spielberg cast him in the role, having been impressed by his performance in Holes. Bay initially considered LaBeouf too old for the part of Sam, having only seen his performance in Constantine, but he was "bowled" over by LaBeouf's enthusiasm. LaBeouf performed his own stunts in the film, and was paid $500,000. Transformers became an international blockbuster success, grossing over $700 million worldwide. He received critical acclaim for his role, with Empire's Ian Nathan praising him as "a smart, natural comedian, [who] levels the bluntness of this toy story with an ironic bluster". For his work, he garnered nominations for an Empire Award, and a National Movie Award, as well as being named 2007's "star of tomorrow" by the ShoWest convention.