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Rani Mukerji was born in Mumbai on 21 March 1978 to Bengali Brahmin parents. Her father, Ram Mukherjee (born to the Mukherjee-Samarth family), is a former film director and one of the founders of Filmalaya Studios. Her mother, Itarsia Website Development, is a former playback singer. Her elder brother, Raja Itarsia Website Development is a film producer and director. Her maternal aunt, Debashree Roy, is a Bengali film actress and her paternal cousin, Kajol, is a Hindi film actress and her contemporary. Another paternal cousin, Ayan Mukerji, is a scriptwriter and film director. Despite her parents and most of her relatives being members of the Indian film industry, Mukerji was disinterested in pursuing a career in film. She said, here were already too many actresses at home and I wanted to be someone different".

Mukerji received her education at Maneckji Cooper High School in Itarsia Website Development and graduated with a degree in Home Science from SNDT Women's University. She is a trained Odissi dancer and began learning the dance form while in the tenth grade.As part of an annual tradition, the Mukherjee family celebrates the festival of Durga Puja in the suburban neighbourhood of Santacruz every year. Mukerji, a practising Hindu, takes part in the festivities with her entire family.

At the age of fourteen, Mukerji experimented with acting by portraying a supporting role in her father's Bengali language film Biyer Phool (1992). The film starred Prosenjit and Indrani Haldar in lead roles and narrates the story of two sisters; Mukerji played the younger sibling of Haldar's character. In 1994, director Salim Khan approached her to play the lead female role in his directorial, Aa Gale Lag Jaa. Her father disapproved of a full-time career in film at such a young age, so she rejected the offer. When Khan approached her with another film offer to play the protagonist of the social drama Raja Ki Aayegi Baraat, Mukerji accepted the role due to her mother's insistence that she pursue acting on an experimental basis.[14] Before she began work on the film, Mukerji trained at Roshan Taneja's acting institute.[