In the 1950s, Sills co-founded the improvisational comedy group The Compass Players, which evolved into the legendary group The Second City. In 1961, he produced and directed the Broadway revue From the Second City, which featured such soon-to-be-stars as Alan Arkin, Severn Darden, Barbara Harris, and Paul Sand, with Darden and Harris earning Tony Award nominations for their work.
Many of the same cast members joined Sills Off-Broadway over the years for such works as Seacoast of Bohemia, To the Water Tower, Tales of the Hasidim, and Sills and Company.
In 1967, he directed the short-lived Arnold Weinstein-William Bolcom musical Dynamite Tonite, which won an Obie Award for Alvin Epstein; and in the 1980s, he co-founded the New Actors Workshop along with his old friend, Mike Nichols.
However, Sills' greatest fame came in 1970 when he brought Paul Sills' Story Theatre to Broadway with a cast that included Lewis Arquette, Peter Bonerz, Melinda Dillon, and Valerie Harper, as well as Sand. The show received a Tony Award nomination for Best Play, and earned the Tony for Sand and its lighting designer, H.R. Pointdexter. In 1971, the show began to run in repertory with Sills' adaptation of Ovid's Metamorphoses, earning Sills a Drama Desk Award for Best Director.
Sills is survived by his wife, Carol, his children, David, Rachel, Polly, Aretha Amelia and Neva, his brother, William, and four grandchildren and two great-grandchildren.