Hathaway was born in Brooklyn, New York, to Gerald Hathaway, a lawyer, and Kate (née McCauley), an actress who inspired Hathaway to follow in her footsteps. The family moved to Millburn, New Jersey, when she was six years old.[5] She has an older brother, Michael, and a younger brother, Thomas. Hathaway has mainly Irish and French ancestry.

Hathaway was raised a Catholic with what she considered "really strong values," and has stated she wanted to be a nun during her childhood. However, at the age of fifteen, she decided not to become a nun after learning that her brother, Michael, is gay. Despite her Catholic upbringing, she felt that she could not be part of a religion that disapproved of her brother's sexual orientation. In 2009, she stated that she is a non-denominational Christian because she had not "found the religion" for her. In early 2010, she stated her religious beliefs as "nothing".

As a child, Hathaway was in a Montessori program at Brooklyn Heights Montessori School as a preschooler and was then able to enter first grade at the Wyoming Elementary School in Millburn, New Jersey while she was technically still a kindergartner. Hathaway graduated from Millburn High School where she participated in many school plays; her high school performance as Winnifred in Once Upon a Mattress garnered her a Paper Mill Playhouse Rising Star Award nomination for Best Performance by a High School Actress. During this time, Hathaway was in plays including Jane Eyre and Gigi at New Jersey's Paper Mill Playhouse (which is located in Millburn, across the street from Hathaway's middle school). She spent several semesters studying as an English major and Women's Studies minor at Vassar College in Poughkeepsie, New York, before transferring to New York University's Gallatin School of Individualized Study, referring to her college enrollment as one of her best decisions, because she enjoyed being with others who were trying to "grow up." Hathaway was a member of the Barrow Group Theater Company's acting program and was the first teenager ever admitted into the program.

A soprano, Hathaway performed in 1998 and 1999 with the All-Eastern U.S. High School Honors Chorus at Carnegie Hall and has performed in plays at Seton Hall Prep in West Orange, NJ. Three days after her 1999 performance at Carnegie Hall, she was cast in the short-lived Fox television series Get Real, at the age of sixteen.

Hathaway is a trained stage actress and has stated that she prefers performing on stage to film roles.[5] Her acting style has been compared to Judy Garland and Audrey Hepburn. She cites Hepburn as one of her favorite actresses and Streep as an icon