early 15c., "prompted by malice or ill-will, intending to mislead," from Old French senestre, sinistre "contrary, false; unfavorable; to the left" (14c.), from Latin sinister "left, on the left side" (opposite of dexter), of uncertain origin. Perhaps meaning properly "the slower or weaker hand" [Tucker], but Klein and Buck suggest it's a euphemism (see left (adj.)) connected with the root of Sanskrit saniyan "more useful, more advantageous." With contrastive or comparative suffix -ter, as in dexter (see dexterity).
The Latin word was used in augury in the sense of "unlucky, unfavorable" (omens, especially bird flights, seen on the left hand were regarded as portending misfortune), and thus sinister acquired a sense of "harmful, unfavorable, adverse." This was from Greek influence, reflecting the early Greek practice of facing north when observing omens. In genuine Roman auspices, the augurs faced south and left was favorable. Thus sinister also retained a secondary sense in Latin of "favorable, auspicious, fortunate, lucky."
Meaning "evil" is from late 15c. Used in heraldry from 1560s to indicate "left, to the left." Bend (not "bar") sinister in heraldry indicates illegitimacy and preserves the literal sense of "on or from the left side" (though in heraldry this is from the view of the bearer of the shield, not the observer of it; see bend (n.2)).