The man, aged in his 60s, was shot in his home in Hartley Brook Road, Shiregreen, in the early hours of Monday morning.
South Yorkshire Police are treating the incident as an 'aggravated burglary'.
Detectives said a group of men broke into the house before the gun was fired.
A police spokesman said: "Police are investigating following reports of an aggravated burglary in Sheffield in the early hours of yesterday morning.
"Officers were called to a property in the Shiregreen area at about 2.45am, after it was reported that a group of men had broken into the house.
"The occupant of the house, a man in his 60s, suffered an injury consistent with a firearms discharge during the incident and has been taken to hospital, where he currently remains in a serious but stable condition."
Detective Inspector Paul Wilson, the investigating officer, said: “This appears to have been an isolated incident and I would like to reassure members of the public that this investigation is being treated as an absolute priority for us. “Thankfully, it is unusual for a firearms discharge of this nature to take place and we are using all available resources to investigate this matter and identify those responsible.”
A shocked resident, who heard the shooting, said it was 'scary' to think gunmen had been in his street.
"I was asleep and woke up after hearing a really loud bang, but didn't know what it was at the time," he said.
"I went to the window to look outside, thinking there might have been a crash or something because it was so loud, but I couldn't see anything.
"The next thing I knew was that there were loads of police in the street the next day and when I heard that the bang had been a gun going off it was a shock."
Anyone with information should call South Yorkshire Police on 101 or Crimestoppers on 0800 555111.