When the Republican Party gained a majority in both houses of the Georgia General Assembly in 2005, the procedural rules previously used to prevent a vote by the full chamber were changed so that the bill was handled as a state bill and not as a local bill. The assembly also repealed the requirement that new cities must be at least 3 miles (4.8 km) from existing cities that had stymied previous attempts to incorporate due to Sandy Springs directly bordering both Roswell and Atlanta.

The bill allowing for a referendum on incorporation was introduced and passed as HB 37. The referendum initiative was approved by the Assembly and signed by Governor Sonny Perdue. Many residents expressed displeasure with county services, claiming, based upon financial information provided by the county, that the county was redistributing revenues to fund services in less financially stable areas of the county, ignoring local opposition to rezoning, and allowing excessive development.

Many residents of unincorporated and less-developed south Fulton County strongly opposed incorporation, fearing the loss of tax revenues which fund county services. County residents outside Sandy Springs were not allowed to vote on the matter. Efforts such as requesting the Justice Department to reject the plan were unsuccessful.The referendum was held on June 21, 2005, and residents voted 94% in favor of incorporation.

In November 2005, voters returned to the polls to elect a mayor and six city council members. Formal incorporation occurred on December 1, making Sandy Springs the third-largest city ever to incorporate in the U.S. The city's police force and fire department began service in 2006. Upon incorporation, Sandy Springs initiated a nontraditional approach by operating as a public-private partnership (PPP), with all but six full-time employees being contracted.In 2010, the city undertook a procurement process to rebid all general city services, which was won by CH2M Hill.

The timing of this contract, during the Great Recession, allowed the city to leverage a cheaper contract due to the economic downturn.In 2010, the city became the first jurisdiction in Georgia to successfully "bail out" from the preclearance requirements of Section 5 of the Voting Rights Act.In 2019, the Sandy Springs City Council moved to scale back the PPP model, directly hiring 183 contract employees, leaving only 15 outsourced full-time workers by the end of 2019.

The city will still outsource a number of services, including the city attorney's office, as well as security, street sweeping and ambulance services. The move is expected to save $2.7 million in the next year and more than $14 million over 5 years.