Allen was born and raised in New York City, the son of Nettie (née Cherrie; November 8, 1906 - January 27, 2002), a bookkeeper at her family's delicatessen, and Martin Konigsberg (December 25, 1900 - January 13, 2001), a jewelry engraver and waiter. His family was Jewish and his grandparents were Yiddish- and German-speaking immigrants.

Allen has a sister, Letty (born 1943), and was raised in Midwood, Brooklyn. His parents were both born and raised on the Lower East Side of Manhattan. His childhood, while middle-class, wasn't particularly happy. His parents didn't get along, and he had a rocky relationship with his stern, temperamental mother.

Allen spoke Yiddish during his early years and, after attending Hebrew school for eight years, went to Public School 99 and to Midwood High School. During that time, he lived in an apartment at 1402 Avenue K, between East 14th and 15th Streets.

He was Nicknamed "Red" because of his red hair; he impressed students with his extraordinary talent at card and magic tricks. Though in his films and his comedy persona he has often depicted himself as physically inept and socially unpopular, in fact Woody Allen was a popular student, and an adept baseball and basketball player.

To raise money he began writing gags for the agent David O. Alber, who sold them to newspaper columnists. According to Allen, his first published joke "was in a gossip column. It read: 'Woody Allen says he ate at a restaurant that had O.P.S. prices—over people's salaries.'"

At sixteen, he was discovered by Milt Kamen, who got him his first writing job with Sid Caesar. He began calling himself Woody Allen. He was a gifted comedian from an early age and would later joke that when he was young he was sent to inter-faith summer camp, where he "was savagely beaten by children of all races and creeds".

After high school, he went to New York University (NYU) where he studied communication and film. He was never committed as a student, however, failed a film course, and was eventually expelled. He later briefly attended City College of New York.

After his false starts at NYU and City College, he became a full-time writer for Herb Shriner, earning $75 a week at first. At age 19, he started writing scripts for The Ed Sullivan Show, The Tonight Show, Caesar's Hour and other television shows. By the time he was working for Sid Caesar, he was making $1500 a week; with Caesar he worked alongside Danny Simon, whom Allen credits for helping him to structure his writing style.

In 1961, he started a new career as a stand-up comedian, debuting in a Greenwich Village club called the Duplex. Examples of Allen's standup act can be heard on the albums Standup Comic and Nightclub Years 1964-1968.

He began writing for the popular Candid Camera television show, even appearing in some episodes. Together with his managers, Allen turned his weaknesses into his strengths, developing his neurotic, nervous, and intellectual persona. He quickly became a successful comedian, and appeared frequently in nightclubs and on television. Allen was popular enough to appear on the cover of Life in 1969.

Allen started writing short stories for magazines (most notably The New Yorker). He also became a successful Broadway playwright, writing Don't Drink the Water, which opened on November 17, 1966 and ran for 598 performances.

It starred Lou Jacobi, Kay Medford, Anita Gillette and Allen's future movie co-star Anthony Roberts. A film adaptation of the play, directed by Howard Morris, was released in 1969 starring Jackie Gleason. In 1994 Allen directed and starred in a third version for television with Michael J. Fox and Mayim Bialik.

His next Broadway hit, Play It Again, Sam, he not only wrote, but starred in. It opened on February 12, 1969 and ran for 453 performances. It also featured Diane Keaton and Anthony Roberts. Allen, Keaton and Roberts would reprise their roles in the film version of the play, directed by Herbert Ross.

Allen is also an accomplished author having published four collections of his short pieces and plays. These are Getting Even, Without Feathers, Side Effects and Mere Anarchy. His early comic fiction was heavily influenced by the zany, pun-ridden humour of S.J. Perelman.