Schultz was born in Milwaukee, Wisconsin, the son of Katherine Frances (née Leslie), a factory worker, and German American Leo Schultz, an insurance salesman.
After his undergraduate work at the University of Wisconsin–Madison and Marquette University, he attended Princeton University, where in 1966 he directed his first play, a production of Waiting for Godot. He joined the Negro Ensemble Company in 1968, which brought him to Broadway in 1969. His breakthrough was directing Lorraine Hansberry's To Be Young, Gifted and Black, which he restaged for television in 1972.
Schultz' earliest film projects combined low comedy with profound social comment (Honeybaby, Honeybaby and Cooley High), reaching a peak with the ensemble comedy Car Wash (1976) and Which Way Is Up? (1977), starring Richard Pryor.
