Portman was born on June 9, 1981, in Jerusalem. Her parents gave her the traditional Hebrew name of "Neta-Lee Hershlag" at birth. She is the only child of Shelley (née Stevens), an American homemaker who works as Portman's agent, and Avner Hershlag, an Israeli fertility specialist and gynecologist. Her maternal grandparents, Bernice (née Hurwitz; 1925–2014) and Arthur Stevens (whose family surname was originally Edelstein), were from Jewish families who moved to the United States from Austria and Russia. Natalie's paternal grandparents, Mania (née Portman) and Zvi Yehuda Hershlag, were Jewish immigrants to Israel. Zvi, born in Poland in 1914, moved to what was then Mandatory Palestine in 1938 and eventually became an economics professor; his parents died at the Auschwitz Concentration Camp. One of Natalie's paternal great-grandmothers was born in Romania and was a spy for British Intelligence during World War II.
Portman's parents met at a Jewish student center at Ohio State University, where her mother was selling tickets. They corresponded after her father returned to Israel and were married when her mother visited a few years later. In 1984, when Portman was three years old, the family moved to the United States, where her father received his medical training. Portman, a dual citizen of the United States and Israel, has said that although she "really love(s) the States... my heart's in Jerusalem. That's where I feel at home." Portman and her family first lived in Washington, D.C., but relocated to Connecticut in 1988 and then moved to Jericho, New York, on Long Island, in 1990.